By Bob Brooks
September 23, 2014
Through 22 years of managing money, I have learned many investing lessons. Some lessons were learned from observation. While many others through the school of hard knocks. I have come to the conclusions that your investment game plan and or strategy needs to have elements of these 5 characteristics to it. The strategy influences the decision making. The 5 principles influence the strategy.
(1) Have a Specific Means to an End
Why do you invest into a 401 K plan? Most people would answer for retirement. My response is how will you know when you get there? Retirement is not specific enough. Without a specific target, you will never know if you are track and if and when to make adjustments. Define specifically what your specific means to an end looks like.
(2) Track your progress
Even if you have specific goals, it is critical to know if you are on track. Further, it is tough to make good decisions unless you know if you are on target or not. How do you do that? I created a benchmarking system to achieve that goal. With a benchmarking system, you will know where you need to be by the end of each year. It will tell you how much you are ahead, behind, or right on the mark. It is impossible to be a good manager of risk without knowing this key information. Goals should be a primary determinant of how much risk to take at any given time. Sadly, the vast majority of people investing for retirement skip this key step.
(3) Have a Plan A and a Plan B
Everyone has a plan A. Invest your money and hopefully watch it grow. However, what if the conditions in the market, prevent that from happening? What if we are in a period where the risk of extreme loss is keep you from staying on target? That is when you implement Plan B versus crossing your fingers and hoping it works out. Just like in 1 and 2 above, the vast majority of investors don’t have a Plan B. That can certainly be a life saver in a tough market.
(4) Investing is step 1….Managing is step 2
I have found that most investors feels like the process of investing is complete once the money is invested. The reality is that it has only started. This is where the most important part of the process starts – managing it for risk. The formula is to invest into a diversified group of effective investments and then to carefully manage them for risk. It is a key element that is not always considered.
(5) Don’t Forget to Include God in the Process
Stewardship is not a responsibility that was ever designed to be carried out alone. God wants to be included in your decision making. It is a little tough to make a mistake if you are making it with God’s peace and the intent of only being in His Will. The only way to get God’s peace is through prayer and studying His Word. Now don’t get me wrong. Investment success is not the reason why you want to include God in the process. Prudent Stewardship and obedience are the reasons why you want to include God in the process.
There are a number of ways to grow money. All of them have pros and cons and none of them are perfect. That makes the effectiveness of decision making much more crucial. Following those 5 principles will increase the effectiveness of your decision making no matter what type of strategy you are following.
One thing for sure is that you don’t have time to waste. If you want to make sure you are on the right track with your investments, send me an email at
or call me at 972-386-0384. When I am not on the radio or writing for the site, I am working with clients and managing money and would love to hear about your situation.