Table of Contents
- 1. Reduce Debt Where Possible
- 2. Manage Your Cash Appropriately
- 3. Monitor the Financial Condition of Your Bank or Insurance Company
- 4. Approach Investment Markets With The Caution They Deserve
- 5. Give Your Portfolio Purpose
- 6. Put Knowledge Into Action
- 7. Work With a Trusted Partner
- Do you have additional questions or want to get started?
- 7 KEYS TO INVESTING
1. Reduce Debt Where Possible
While some debt may feel unavoidable, much can be paid off. If you cannot pay down the debt you already have, endeavor to not add any more. Wherever debt must be maintained, make sure your interest rates are fixed.
Living debt-free offers you more flexibility in how and where you can invest. Credit card debt is the primary reason most people defer investing, and can be a major hindrance to your portfolio opportunities.
Making the most of every dollar is critical for any person on their investment journey. Carrying unnecessary debt can severely limit your ability to build a budget that takes care of your needs, goals, and your future. Reducing debt where possible gives you more control over your financial choices, your savings, and the ability to capitalize on investment opportunities. Compound interest is a powerful factor that can transform your portfolio. Don’t allow debt to stifle your financial goals. Reduce it where possible.
2. Manage Your Cash Appropriately
Given the decreasing value of cash today, you might be wise to view it as a necessary evil – but the emphasis in this section is on the “necessary” part. In case of a natural disaster or unforeseen event, you’ll need some cash for everyday expenses until the lights come back on and life gets more or less back to normal. To maintain a balance between holding a depreciating currency and having some savings for emergencies, a minimum of three to six months’ living expenses should be held in cash at all times. Beyond that, any substantial cash position should be ready to go to work for you.
Cash in a portfolio offers liquidity that can be used for opportunistic investing. This allows you to adjust to changing circumstances by purchasing more insurance assets, more growth & income assets, paying bills, and purchasing household items or food, if the situation calls for it. Cash provides the versatility and ability to move quickly in response to market changes, whatever they may be. The essential concept here is to have a healthy and diversified portfolio, one that prevents you from getting caught and squeezed by unforeseen shifts in the market.
3. Monitor the Financial Condition of Your Bank or Insurance Company
Banks are prone to rely on others to rectify their bad decisions. They regularly call on the government (i.e., taxpayers) to bail them out when they make too many loans to people, companies, or countries that can’t pay them back. In fact, they’ve done that so many times that governments are losing their ability to bail out the banks, so some governments now require depositors to take a loss before taxpayers. Consider it an ignorance or folly tax on depositors who bank at insolvent institutions. From a market perspective that might be somewhat logical. But given US government assurances that the FDIC has depositors’ backs, it is more than a little bit disingenuous. This depositor haircut is called a “bail-in” because the money doesn’t come from taxpayers “outside” the bank, but from customers “inside” the bank.
The bank confiscates depositors’ money, gives them an IOU of some sort (usually stock in the bank, which is typically of far less value than the money taken), and calls it square. Depositors might disagree. If this concerns you, call McAlvany ICA (1.800.525.9556) today to receive a free, independent rating of your bank’s strength and solvency. We can help you assess its safety.
4. Approach Investment Markets With The Caution They Deserve
The stock market is a tool to be used for investment gain. Your savings are equally important, prudent assets redesigned with high-risk investments. Let the stock market be the growth vehicle it is meant to be, and allow only a measured percentage of your assets to chase those gains.
For an in-depth discussion of this aspect of investing, see our guide on the Investment Triangle Strategy, which ICA has developed over decades and uses to manage its own funds. This is an excellent way to give your portfolio versatility, stability, strength, safety, and growth. It also helps you refrain from using funds dedicated to one purpose for another – which cripples those same portfolio attributes and should be done only in an emergency.
5. Give Your Portfolio Purpose
The old adage of “failing to create a plan is planning to fail,” couldn’t be more true when it comes to your investing choices. Creating long-term financial goals helps you lay out a strategy and make wise decisions on your investing journey. Long-term goals lead to long-term relationships with enduring values: Truth, honesty, integrity, and fair dealing.
We live in an age where Wall Street is so focused on investment earnings that it ignores the long-term well-being of shareholders. It’s also an era where algorithmic-trading computers buy and sell within milliseconds, which in turn leads to volatile investing conditions that can shift on a dime. When you take time to give your portfolio a strong purpose, you can outlast the short-term focused Wall Street and algorithmic-based traders.
This view creates a portfolio with purpose, endurance, and meaning, which helps not only you, but your children, their children, and their children after them. It’s a marathon, not a sprint. Set up your investment goals for success with a clear purpose for your portfolio.
6. Put Knowledge Into Action
Being proactive means continually seeking new information about your investments and why you’re invested. Do your own research and don’t chase hot tips before doing your homework. Markets shift continually, which means any time spent learning more will always be worth your while. Then compare the information gathered with your investment goals and adjust accordingly. Never let panic pull you off course, as that is a quick pathway to losing your money.
7. Work With a Trusted Partner
People make a difference in almost all endeavors. Experience and longevity are at the core of wise investment counsel. When important things are at stake (like your savings), find the right people to work with.
Of course, this site is largely about finance – this is your money we’re talking about. You’ve worked hard for it, and your future financial health depends on you to keep it and increase it. But good people are an important part of this business, too. The McAlvany Financial Group has been in the precious metals and money management business for 48 years.
Many of our clients have been with us for decades, as they trust us and have found us both skillful and trustworthy.
Do you have additional questions or want to get started?
Simply download the report below, fill out the worksheet, and schedule a free consultation. During our call, we’ll discuss your current portfolio and the steps you can take to ensure it’s meeting your expectations and goals.
Download the full report in PDF form below.