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Feel like you’re wading into unknown territory when it comes to investing? Lots of Boomers feel that way, which is why so many avoid investing altogether. You’re a step ahead simply because you’re learning how to make successful investing work for you.
To help you succeed, we’ve put together eight keys to successful investing, concepts that apply across the board. Follow these ideas, and you’ll be well on your way to securing your wealth.
1. Keep your overall costs exceptionally low
In the investment industry, investors get to keep and compound what they do not pay for. Most investors fail to have a good investment experience because they dramatically overpay. Hire a low-cost investment advisor who will allow you to keep more of what’s yours by driving down the costs of investment managers (mutual funds), brokers/traders, custodians and taxes.
A low-cost investment advisor who uses passive investment solutions can help you control the amount you pay and therefore provide you with an opportunity to have a positive investment experience. Costs matter dramatically, and they are even more important to control in a low-return environment. Successful investing requires it!
2. Hire an investment advisor who has a fiduciary responsibility to act in your best interests
Some brokers and advisors have to present investments to you that are only “suitable.” Other investment advisors are fiduciaries.
Fiduciaries have to act in your best interest. Work only with fiduciaries.
3. Focus on the most important return—your after-tax return
Taxes can be a huge drag on your total return. Work with an investment advisor who can help you develop strategies to control portfolio turnover, harvest losses and optimally locate assets between qualified and nonqualified accounts to help create an extremely tax-efficient investment experience.
4. Let the power of the capital markets work for you
Diversify your investments globally. Most investors fail in part because their portfolios have insufficient diversity. Hire an investment advisor who will help you diversify your investment portfolio over the many different asset classes that make up the global capital market.
Harnessing the global capital market return should increase your chances of having a positive long-term successful investing experience.
5. Do not time the markets—ever!
Market timing leads to significant under performance over time. Trying to time the markets is always a bad idea!
6. Access efficient and unique investment vehicles
Hire an investment advisor who can help you gain access to world-class passive investment managers such as Dimensional Fund Advisors and Vanguard. These passive investment managers are low-cost, tax-efficient and shareholder-oriented.
Ideally, your investment advisor should have the ability to proactively identify new investment vehicles that can add value to your portfolio.
7. Make sure there’s a separation of responsibilities within your investment team
Ideally, in a post-Madoff world, your investment advisor should be different than your custodian. This key separation of responsibility should help keep your assets safe and allow you and your investment team to optimize your overall investment program.
8. Engage only well-credentialed investment advisors
Ideally, your investment advisory team should include a CFA and CPA.
What other investment fundamentals would you add to this list?
Jim Hagedorn, CFA, Managing Partner of Chicago Partners Investment Group is featured in Worth® Leading Wealth AdvisorsTM, a special section of WORTH® magazine from where this article was reprinted. Worth®, a Sandow Media publication, is a financial publisher and does not recommend or endorse investment, legal or tax advisors, investment strategies or particular investments.
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