A good investment strategy to make money investing
Whether it’s the year 2011, 2012 or 2020, this is a good investment strategy to make money investing without a crystal ball. Any good investment plan considers both investment selection and timing. If you can’t make money investing with this simple strategy, rest assured that only the lucky few will make money.
Before you stress about putting together a good investment strategy for 2011 and moving forward, ask yourself the obvious question. Where do the most successful people invest (or where have they invested in the past) to make money by investing for the long term? The answer before the financial crisis was bonds, stocks, and real estate. The answer today for the average investor is the same and takes the simple form of bond funds, stock funds, and real estate equity funds. In the final analysis, if all three of these investment areas stagnate, we are likely in a slump and only a few lucky people or smart speculators will make money investing.
A good investment strategy is not based on speculation or trying to time the markets. No matter what you hear, no one has a proven, consistent track record of timing the market outperforming the markets significantly over the long term. If they did, they would make a lot of money investing and hide their secrets, not share them. So why not settle for a good investment strategy that makes only one main assumption: that the US will grow and prosper over the long term?
Investing money in the three areas above is simple with mutual funds. To reduce your risk and add flexibility to your investment strategy, add a fourth type of fund called a money market fund. At current interest rates, they may not seem like a good investment, but they are safe and earn interest that follows current rates. To be more specific, by owning just 4 different funds, you can put together a good investment strategy for 2011 and beyond and make money by investing in America’s future. In order from high security to higher risk and higher earning potential: a money market, a medium-term bond, a large-cap equity income, and an equity real estate fund is all you need to own.
A good investment strategy to get your feet wet is to simply invest the same amount of money in all 4 funds. The timing strategy requires no judgment or guessing. One year later and once a year after that, you just move the money around so all 4 funds are back to the same value. This automatically forces you to take some money out of your best-performing funds and move more money into those that didn’t do as well. The net result over time is that you are buying more shares when prices are low, you are selling shares that are relatively expensive.
This is also a good way to earn money by investing for the long term while keeping risk in check. Simply buying and holding funds is not a good investment strategy, and has caused many average investors problems in the past. For example, real estate funds were good investments for several years until the financial crisis took them down. If you had owned them and just stuck with it, by 2009 you could have amassed a significant amount of money and be at risk there…resulting in huge losses as a result of the financial crisis.
There is more than simplicity involved in what I call a good investment strategy for 2011 and beyond. This strategy employs two of the only time-tested tools in the investing business: BALANCE & REBALANCE and DOLLAR COST AVERAGING. The first tool keeps you on track while controlling risk, and the second is the tool that works to lower your average cost of investing by making you buy more shares when prices are lower and fewer when prices are high.
You can put together a good investment strategy with only moderate risk by owning just 4 different mutual funds. People make money by investing for the long term in bonds, stocks, and real estate; and the smart ones save some money in a safe investment also for flexibility. In years past, some people just got lucky and made money investing without a strategy. With a good investment strategy you will not need to cross your fingers and trust in luck. If America prospers in 2011 and beyond, so should you.
