Ten New Investment Concepts the Time has come.
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Ten New Investment Concepts: The Time Is Now
Summary
There's a growing belief that mutual funds are no longer effective. Despite attempts with index funds, they haven't lived up to expectations. Here are some fresh and rediscovered strategies to revitalize your investment program:Keywords
investment, financial plan, stock market, fixed incomeArticle Body
There's a buzz suggesting mutual funds are outdated and ineffective for many reasons. Index funds tried to bridge the gap but fell short. Here are some innovative and long-lost ideas to rejuvenate your investment approach:
1. Ditch Popular Averages
Over the past six years, major averages have been mostly negative or merely recovering. Meanwhile, the NYSE advance/decline line has been positive. Last time averages rose, issue breadth was negative.
2. Revisit Investment Basics
Many confuse quality with analyst expectations and think diversification means owning one of everything. In reality, these are essential risk management tools every investor should use.
3. Understand the Power of Income
Base income must grow annually to keep pace with inflation. Growing market value can be deceptive, while consistent income builds the road to retirement.
4. Buy Low, Sell Higher
Stock prices fluctuate for both profitable and unprofitable companies. Prioritize buying quality stocks at lower prices, set a reasonable profit target (around 10%), and seize the opportunity.
5. Adopt the Working Capital Model
For portfolio asset allocation and performance evaluation, prioritize holdings' cost basis over market value. This approach offers meaningful short-term analysis and prevents fixed income mistakes.
6. Embrace Market Volatility
Volatility is one of the few certainties in the market. Use it wisely to accelerate your investment success. Avoid turning unrealized gains into realized losses.
7. Remember Peak-to-Peak and Trough-to-Trough
Tests like these remain valid indicators of a manager's skill. There’s no proven correlation between calendar years and market, interest rate, or economic cycles.
8. Appreciate Corrections as Much as Rallies
Profit-taking during rallies can be easier than buying during market downturns. Understand both dynamics; they’re two sides of the same coin.
9. Understand the Investor's Creed
Trading often has a bad reputation, but smart timing and selectivity matter. In rising markets, sell more than you buy to enhance your cash position. In falling markets, buy more than you sell, reducing cash.
10. Remember, Investing Is Personal
It’s about your money, risk tolerance, goals, and objectives. Comparing yourself to others or benchmarks is futile. Focus on your diversified portfolio's value changes.
11. Bonus Tip: Set Rules and Be Disciplined
Just do it.
These insights are from "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read." Reconsider these concepts to realign your financial strategy.
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