It is so easy to get down into the gears of investing and lose sight of the big picture. Pulling back from portfolio management, necessary as that is, and laying out the long-range picture of investing is essential from time to time. That is the situation today, so here are some fundamentals to investing.
- Follow "The Golden Rule of Investing" by saving as much as you can as early as you can.
- Determine if you are going to manage the portfolio on your own or seek outside help. Each investor needs to make this decision.
- Will the investment approach be active or passive. Those terms are defined in great detail elsewhere on this blog. While I stress a passive approach to investing, the act of developing an asset allocation plan places one on the semi-active team. Once the Strategic Asset Allocation (SAA) plan is in place, temper active management and take a passive approach.
- Diversify all over the world through the use of non-managed index funds or non-managed ETFs. It is too bad one now needs to stress non-managed ETFs, but as this market grows, so will the desire to actively manage ETFs. Such was not the case ten years ago.
- Rebalance the portfolio. There is an ongoing debate as to how frequently this should occur. Instead of using a specific time frame, rely on the Dashboard of the TLH spreadsheet as a guideline when to rebalance. The most recent version of the TLH spreadsheet includes a data table show how many shares of the ETF representing each asset class need to be purchased or sold to bring the asset class back into balance.
- Read. Educate yourself by reading books suggested on this blog.
If any of the above ideas are not clear, post your questions in the comment section provided below. For most readers this material is a review.