7 Keys To Smarter Investing

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, purchasing household items or food if the situation calls for it. Cash gives you versatility and the 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 typical of far less value than the money taken), and calls it square. Depositors might disagree. If this concerns you, call McAlvany ICA today to receive a free, independent rating of your bank’s strength and solvency. We can help you assess the safety of your bank. Click Here for a free bank rating

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, and long-term assets need to be cautious around 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 a much more in-depth discussion of this aspect of investing, see our guide on the Perspective 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 & make wise decisions on your investing journey. Long-term goals lead to long-term relationships with lasting long-term values: Truth, honesty, integrity, and fair dealing.

We live in an age where Wallstreet is so focused on investment earnings calls that it ignores the long term well-being of its 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 the time to give your portfolio a strong purpose you can outlast the short-term focused Wallstreet and algorithmic-based traders.

This view creates a portfolio with purpose, endurance, and meaning, that helps not only you, but your children, their children, and their children after them. It’s a marathon, not a sprint. Setup your investing goals for success with a clear purpose for your portfolio.

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6. Put Knowledge Into Action

Being proactive means always seeking new information regarding what you’re invested in and why. 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 investing 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 the difference in almost every endeavor. Experience and longevity are at the core of wise investment council and 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 worked hard for it, and your future financial health depends on your being able 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 because they trust us and have found us both skillful and trustworthy.