Find a Methodology and Minimize Investment Madness

There are many reasons to be investing these days, and too much opportunity to not have your money working for you.

However, I believe the majority of people dread having to deal with investment matters, and tend to jump into purchases and then hold their breath hoping for the best. After a long day at work and taking care of the family, it's hard to get excited about reading up on your 401(k) options, Morningstar ratings and fund performances.

If this sounds like you, there are basically 3 choices.

You can have your investments professionally managed, you can continue as you have in the past & keep your fingers crossed, or you can find a methodology that objectifies the investing process (that's buying and selling investments) and helps you maximize your long-term results.

To determine if you need help managing your investments(and this doesn't necessarily mean having to pay for advice) you might want to ask yourself these questions:

=> Do I really have the time and interest to follow the market closely on a daily basis?

=> Have I done well in the past managing my own investments?

=> Do I really want to add another layer of work and responsibility onto an already busy schedule?

If you're like most people, you would answer yes to some and no to others, so how do you decide? If you think you could have or should have done better with your investments, then you need some help. Don't feel bad. Having counseled hundreds of people over the past 15 years I can honestly say that everybody needs some help, whether they are aware of it or not.

Why? This could come as a surprise, but, in fact, your financial life is a lot shorter than your physical life?

Most people who end up investing don't really start working and making money until they are about 25 years old. Considering the average retirement age of 65, this gives you only 40 years to save and invest wisely.

If you make a poor investment decision, such as trying to stay fully invested during a bear market, you could lose big both in terms of diminished dollars and wasted time.

To drive home this important point, let me give you an actual example involving my own portfolio. For ease of illustration I have adjusted the beginning portfolio balance to $10,000.

During the period from 1/25/91 to 10/13/00 my $10,000 investment grew to $37,840, which is a 14.67% compounded annual return.

On 10/13/00, based on a methodology I was following, I liquidated all of my domestic mutual fund positions and moved 100% to the safety of my money market account. Thanks to this move, my portfolio retained 100% of its value on that date.

As we now know with hindsight, most people held on to their investment positions and have so far lost on average 50% to 60% of the value of their portfolios. For this example let us use 50%.

If I had held onto my position, my portfolio would be down to $18,920. Last time I hit that level on the way up was in 1995.

In other words, not only would I have lost 50% of my portfolio I would have lost even more by having used up 20% (8 years) of my total financial life.

How can you avoid mistakes like that in the future? Spend a little of your valuable research time looking for investment methodologies that allow you to side-step bear markets and let you move back in during bull markets. In other words, invest your time looking at methodologies instead of investments themselves. This will lay the foundation for more effective use of your money and time.

If you find a methodology that you like, and it matches your investment philosophy, stick with it for the long term. It should have the aspect of telling you when to get out of, as well as when to get into, an investment.

I suggest you follow these broad guidelines:

• Don't be afraid to take a small loss to avoid bigger disasters.

• Stay away from commissioned sales people (because they have incentives other than your best interests), and if you use an advisor, be sure he or she is fee based.

• Above all, don't get overwhelmed by news, rumors and predictions that are irrelevant to your strategy.

If you take this advice, I guarantee that pretty soon sleepless nights will be a thing of the past and you'll be on your way to more confidently and successfully (that means profitably) managing your investments.

About The Author

Ulli Niemann is an investment advisor and has been writing about objective, methodical approaches to investing for over 10 years. He eluded the bear market of 2000 and has helped hundreds of people make better investment decisions. To find out more about his approach and his FREE Newsletter, please visit: http://www.successful-investment.com; ulli@successful-investment.com

---

Investing & Online Stock & Share Trading: Money & Risk Management - Atkinson Portfolio Planner (1)

This article was originally featured in Daryl Guppy's 'Tutorials in... Read More

Useful Tips on Investing

Here are some useful tips on investing. When you make... Read More

The Demise of Buy & Hold

Based on consistent results I think Buy & Hold should... Read More

Have You Ever Seen A Map of the World Turned Upside Down?

For those accustomed to viewing things a certain way, it... Read More

Pros & Cons of Investing in Bonds

What are Bonds?A bond is a debt security, by which... Read More

College Savings Plans ? Are They The Best Choice For My Child?

College Savings Plans ? are they the best choice for... Read More

The Truth About Real Estate Investing - Is It Right For You?

You have probably been hearing, seeing and reading that real... Read More

Your Worst Enemy To Successful Investing - The Media

How do you make your investment decisions and where do... Read More

Fundamentals of Option Pricing

When one begins to consider an option, it is very... Read More

Volatile Oil

The Light Crude Continuous Contract fell from $67.70 a barrel... Read More

What If You Absolutely Positively Could Not Lose - Would You Play the Stock Market?

Seniors on fixed incomes face a unique problem. Where do... Read More

Property Investment Just Got Exciting

There is an area in Brazil that has lower crime... Read More

Investing for Retirement - Not an All or Nothing Play

In 1519, Hernando Cortes, beached on the shores of unexplored... Read More

Getting Started Investing is Often the Hardest Part

There are several reasons people give for not investing their... Read More

Invest or be Pink Slipped

Firing an employee seems to be easier and easier for... Read More

How to Choose the Right Share Class

You'll want to opt for the no-load or institutional share... Read More

Before You Start Investing

There maybe several reasons why you to want to invest... Read More

Investors: Avoid These 5 Common Tax Mistakes

For many investors, and even some tax professionals, sorting through... Read More

Invisible Mutual Fund Fees Erode Your Returns!

Many investors think that investing in mutual funds is free.... Read More

Bearish or Bullish?

If you are interested in stock investing and the stock... Read More

The Power of Small Numbers: Trading Success is Based on Consistency, Not Home Runs

Online trading is so seductive - just sit, click, and... Read More

Getting Started In Investing

Are you ready to open your pathway to financial independence?Well... Read More

An Economical Retirement Investment Plan

The practice of economy, directed toward a retirement investment plan... Read More

Five Sure Fire Way to Secure Your Financial Future

"You can be poor when you're young, but you can't... Read More

Financial Planners

"Financial planners are like dentists: they may occasionally inflict pain,... Read More

The 8 Biggest Mistakes When Designing Portfolios - and How To Avoid Them

Are you as good an investor as you think? Do... Read More

Stock Market Money Management Skills

Let's start by saying: You can't be afraid to take... Read More

Effective Advice For A New Generation of Investors

CATCHING A FALLING KNIFEOne of the most common mistakes made... Read More

Real Estate Clubs Hot Among Investors

Six or seven years ago, the stock market was booming,... Read More

Reasons For Joining An Investment Club

Whether you're a novice investor or an experienced stock picker... Read More

How Eating Bitumen Made Me a Better Stock Trader

Stock market trading is a fascinating activity.There are so many... Read More

The Basics of Tax-Free UK Financial Spread Betting

Financial Spread Betting (or Trading) offers a tax free method... Read More

Numismatics are for Collectors, Not Investors

As a precious metals investor, you may heard much about... Read More