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What separates successful investment strategies from those that fail? It’s usually not expert stock picking or timing the market – it’s leveraging what you control to your advantage. There are many things you don’t control: market fluctuations, tax laws, and inflation rates, to name a few. But there are many things you do control: how much you save, how much you spend, and if you stick to your investment strategies.

With that in mind, these 6 fundamental steps can help build an investment strategy based on what you can control.

  1. Define your investment goal. What do you want this investment to do for you? Allow you to travel when you retire in 15 years? Send your daughter to college in 5 years? Buy an investment property next year? This helps establish your time horizon – how long your investment can grow before you cash it in.
  2. Set your risk tolerance. How much do stock market ups and downs bother you? If you sell your investments in the middle of a downturn, your strategy is likely to fail. Instead, think through how you’ll respond to major declines in advance and pick a strategy that won’t keep you up at night. A high risk tolerance and long time horizon usually means more in stocks. A low risk tolerance and short time horizon tends to mean more in bonds.
  3. Don’t put all your eggs in one basket. Don’t go all in on the stock you think will be the big winner. Build a portfolio – a mix of different types of investments – that is historically proven to serve your goal rather than going all in on Tesla or Amazon and crossing your fingers. Look at downturns like the Great Recession of 2008-09 or Covid-19 in 2020. Would your portfolio have recovered in time to meet your goal? Would your risk tolerance have allowed you to ride out the volatility? If so, you’re on the right track.
  4. Don’t forget about taxes. You don’t control tax laws, but you can learn about them and use them to your advantage. IRAs and 401(k)s are tax-sheltered, saving taxes on capital gains, dividends, and interest until you make a withdrawal. In taxable investments, however, you’ll pay those taxes every year even if you don’t spend the money. Where possible, put your less tax-efficient investments in tax-sheltered retirement accounts and focus on tax-efficient holdings in taxable accounts. The less you pay in taxes, the more money you keep in your pocket, increasing your overall return.
  5. Automate your savings. Set an automatic monthly contribution to your investment accounts. This helps take advantage of market ups and downs by buying more shares when the market is down and less when prices rise – otherwise known as Dollar Cost Averaging. You’re also making consistent progress no matter how busy you are.
  6. Systematize your reviews. Go back through steps 1-5 on a regularly scheduled basis to determine if your goals or risk tolerance have changed, or if investments need to be rebalanced. A full service financial advising team like ours sets an annual calendar of plan updates and investment reviews to ensure your strategies are on track and you stay up to date.

A disciplined strategy is the key to successful investing, enabling you to start on track and stay on track as the world changes.

Alterra Advisors - Josh Whelan

Josh Whelan

CFP®, CLU®, ChFC®
Partner, Financial Advisor

About the Author

Josh sees his profession as a calling, not just a career. His motive for pursing financial planning was very personal. While working on a degree in marriage and family counseling, Josh’s father was diagnosed with multiple sclerosis. Josh decided then and there to change career paths to help his family prepare for an uncertain financial future. Financial planning became his path to serving others.

Josh applies his passion for personal relationships and helping people thrive as a financial steward. His “listen first” approach seeks to understand his clients’ true financial goals and then offer the open communication and guidance needed to reach those goals.

A native of the Pacific Northwest and a graduate of Seattle Pacific University, Josh serves many kinds of clients, but has established a niche helping dentists integrate their personal and practice finances. He’s also a regular lecturer at the University of Washington School of Dentistry, helping the school integrate financial education into the curriculum.

The “Alterra” name was coined by joining the Latin roots “alter”, the origin of the word “altruism” with “terra” meaning earth or land. This name reflects the company philosophy of “clients before profits” and providing firmly grounded advice.

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