How To Set Investment Goals And Develop Investing Strategies

It is extremely important for investors to know how to set investment goals and develop investing strategies to achieve important financial milestones.

If you have decided to take control of your investments you must know how to set investing goals and develop investment strategies to achieve important financial milestones. Make no mistake, your success and your future depends upon it.

Once you have clearly identified your financial goals, the next important undertaking is establishing your long-term investing strategy. The importance of this step cannot be understated and most definitely should not be overlooked by anyone. To be successful at this means you are much more likely to reach important objectives and accomplish goals.

The first consideration when establishing your investing strategy is to determine the time frame you have to invest. The less time you have to make investments, the more aggressive your investment strategy will have to be. Likewise, the more time you can afford, the less risk you will need to expose yourself to.

After you have outlined your investing timeline, it is time for you to properly identify your tolerance for risk. As mentioned above, the less time you have to invest, the more bold your strategy for investment will have to be. Carefully consider the personal, political, and economic factors that pose the greatest risk to your financial well-being.

It is also very important to determine how you will exit your investments, and profit from your years of patience and perseverance. When the circumstance are right, be prepared to sell your investments. After all, making a profit from investments is part of achieving your financial goals.

Goal-setting is an important part of being a successful investor. Equally as important is being a good strategist. To be successful at both of these, you must be acutely aware of your economic surroundings, financial health, and risk tolerance. This knowledge will establish a profitable investment strategy, and make you a winning investor.

You Should Know This Before Taking Control of Your Investments

If you have decided that you do not want to rely on a financial adviser and you would like to take control of your own investment portfolio, there are a few things you should know before investing independently.

Stocks are not the pillars of a portfolio that money managers would have you believe they are. In fact, many traditional investments – like stocks and bonds, are being replaced by hard assets. Investors’ interest has shifted to tangible assets that have proven they can protect an investor’s investment principle. This can include fine wine, real estate investments, and shipping containers; to name only a few.

Do not limit yourself to a single market or industry. The world is full of profitable opportunities. Look outside your region for appealing investments. For example, the economic growth in Asia, China and India in particular, is fueling prosperity across the globe. Even the North American economy is performing well, and in doing so, is presenting new opportunities to invest.

Seek-out income producing investments. By choosing investment options that generate income, investors can supplement their income or use revenues to reinvest. A leading example of an income generating investment is when investors invest in containers. To my knowledge, these returns are paid monthly, like a real estate rental agreement or lease.

Today’s investor wants more control over their financial future, particularly in instances where they have a low tolerance for risk. The global financial crisis caused people to reassess the investments in their portfolios, as well as the way they choose investments and invest.

Gone are the days when stock brokers, like sleazy salesmen, swindled investors with the promise of financial security and prosperity. Today’s investment-seekers are more cautious. Because of this, they are performing their own investment research and searching for credible reviews and genuine testimonials.

You Must Have An Investing Plan To Achieve Financial Goals

With an ever-increasing number of opportunities in the investment marketplace, some investors are feeling overwhelmed by the choices. If you are one of these people, the first step to overcoming those feelings is to establish a clear financial goal. This will help you to define your appetite for returns, and identify your tolerance for risk. Both of which are incredibly important to know, especially when deciding when to buy or sell an investment.

When establishing financial goals for yourself, it is necessary to determine a firm timeline to achieving them. Doing so will provide valuable insight about the risk necessary to reach your desired returns. Once you have discovered the appropriate amount of risk, it will help you to narrow down your investment options, by eliminating investing opportunities that are too risky or pay out too little.

It is imperative that you maintain the path you have set to your financial goals. Any wavering off-course could result in losses and have disastrous repercussions for your financial well-being. If things need to be revised, do so with caution and great care. Be aware of how introducing or removing an investment will affect the other assets in your well-built portfolio.

If circumstances change and you are wanting to make revisions to your financial goals, be aware that it is necessary to revise your investing plan too. If the destination changes, the roadmap must too. The only way to get to where you want to be, is to follow a meticulously planned route.

The simplest way to prevent being overwhelmed by the plethora of investing options is to have a plan that addresses your obvious need for consistent investment returns, as well as outlines the risks you can expect. By clearly outlining the path to follow to success, you improve the odds of achieving your financial goals in the timeline allotted.

Should You Rely Upon An Adviser To Manage Your Investments?

Some investors see the expense of an adviser as an avoidable and unwanted loss. Thus, many choose to advise themselves and manage their own investments.

Many investors wonder whether they should rely upon a financial adviser to manage their investment portfolio. Although this approach will save them hours of investment research, and prevent many sleepless nights, commissions and fees will reduce profits and lower returns. In the eyes of some investment-seekers, this expense is seen as an avoidable and unwanted loss. Thus, many choose to advise themselves and manage their own money.

In order to be of any value to an investor, a money manager or adviser is expected to closely monitor international developments and stay constantly aware of changes in the world’s financial markets. This means watching gold, bonds, ETFs, stocks, and more. Moreover, managers/advisers are relied upon to swiftly apply their insight to the funds they manage; often for an almost unmanageable number of clients.

The trouble with relying upon a financial adviser or money manager is that the content they consume is subject to their own interpretation. This means that investors are relying heavily upon their adviser or manager to have a proper, unbiased, factual understanding of the information presented. It is no place for personal, unsubstantiated opinion, like this example with Davenport Laroche discovered on an adviser’s website.

A growing number of investors are choosing to do independent investment research to gain their own understanding of the investments in their portfolio. This allows them to better assess tolerance for risk and understand how each investment is performing. The result is a more confident investor that can build and maintain a strong investment portfolio, without the help of a costly fund manager.

The downside to being your own investment adviser is that the responsibility to stay informed falls squarely on your own shoulders. Likewise, in the event of a worst-case scenario, the blame is also entirely yours. In some instances, the adviser’s fees will be less than the losses that an inexperienced investor could potentially incur.

Some Money Managers And Advisers Publish Bias, Untrue Reviews

I have seen some instances where money managers and advisers have contributed to fake news by publishing bias, untrue investment reviews. They do so with the intention of discrediting others and in turn making their investing offerings seem more enticing. An example of this comes from Alexis Assadi, a financial, investment adviser from Canada.

Taking the position of a conspiracy theorist, Assadi suggested that there is collusion between three leading container leasing companies. He argues that this conspiracy is a danger to investors. What is his motivation for making such an accusation? To attract and retain clients for his financial services.

Aside from leasing containers to shipping companies, the intended targets of Assadi’s attack also offer an opportunity for investors to invest in containers, and earn a better rate of return than Assadi can deliver. It is possible that Alexis Assadi fears that this may cause prospective and existing clients to pursue container investment opportunities outside of his portfolio. Doing so would mean a loss in revenue, profit, and opportunities for him.

Advisers like Alexis Assadi also rely heavily upon newsletter subscriptions, generated from their website, to build a list of prospective clients. Encouraging more traffic to his webpages, by any means necessary, is a proven way to build newsletter subscribers. This is especially important to Assadi because he can continuously market his investments and services to these unsuspecting people afterward.

In my mind, Assadi fails to establish any definitive proof of collusion between the companies he has targeted. Instead Assadi shares a grandiose theory and opinion to cast doubt in the mind of the investors who find container investing more appealing than anything he has to offer. Alexis Assadi is by no means the only financial adviser to engage in this type of defamation. The practice of libel and slander is more widespread than investors are aware of.

How To Research Investment Opportunities Like a Pro

With so many opportunities to invest in, investors must research offerings with meticulous detail to uncover their best investing options. Doing so involves researching the company and industry, as well as reading investor reviews to gain deeper insight and a deeper understanding. This approach to choosing investments will help to determine the viability and profitability of investment offers, and identify risk factors that could affect returns.

Company Research

Look in traditional and digital publications for information that provides insight into key elements of the company’s operations. This includes corporation structure and corporate officers, profits, and financial commitments. This information will help you to determine the company’s position among its competitors, as well as forecast its future performance.

Industry Research

It is important to understand the basics of the industry the company operates in. For example, the global shipping industry has many divisions to invest in. These include charters, shipping containers, and infrastructure. In this instance, and in similar instances, investors should focus their attention and research on the specific sector of the industry their investment operates within. This will provide an outlook on what influences performance.

Investor Reviews

Scour the Internet for investor cautions and recommendations. For example, this Davenport Laroche review offers an investor’s experience and provides insight into the company and its products. This information can help investors determine their tolerance for risk and decide if/where the investment/s fit into their portfolio.

A Final Thought

Investment seekers who take a cautious approach to investing certainly appreciate the depth of knowledge that is needed to make a confident decision. Conducting extensive research into the company, the industry – or specific sector, as well as investor investment reviews, will ensure that investors can base their decisions on facts, not fiction. Investors can expect that this approach to investing research delivers better returns, and better sleep at night.

Choose Investments That Reduce Chances of Worst-Case Scenario

Before you start making investments, be certain that you have the funds to do so. If you are behind on your monthly expenses, have high-interest debt, or meager savings set aside for emergencies, it is recommended that you prioritize those aspects of your life first.

If investing makes financial sense, meaning you are using money you don’t need for at least the next five years, choose investments that reduce your chances of a worst-case scenario; which is, of course, losing all of your money.

If you’re not willing to accept the worst that can happen, don’t do it. – Muriel “Mickie” Siebert

Investing all of your money into a single stock is risky investment strategy because your money is dependent upon the performance of a single company. Investors can minimize stock market risks by diversify their portfolio holdings. This includes investing in a variety of companies in different industries or regions. As an alternative to equities, some investors believe U.S. Treasury bonds and investments in hard assets are among the safest investments.

Across the globe, the current investment environment is very uncertain. Investors are facing a range of risks that could have a significant impact on their wealth. Some of these risks are well known. These include the geopolitical concerns created by Brexit, the election of Donald Trump, higher interest rates in the United States, and climbing debt levels in China. As well, policy risk is a growing concern for investors. Are governments making the right decisions? Is there the political motivation to see policies through?

All things considered, in 2017, the biggest challenge for these organizations will be to balance growth objectives with short-term liquidity needs. Investors should expect that there will be challenging years during the course of their investment career. But, over the long term, a commitment to investing and a well-diversified strategy have consistently proven to be the most successful approach.

Make An Educated Decision About Alternative Investments

When you are trying to make your first alternative investment, there are so many different types of investing options to choose from, the process can quickly become overwhelming. This makes it all the more important for you and/or your adviser to understand the fundamental differences between non-traditional investing options, so as to be able to properly evaluate risk versus reward of alternative investments.

This article will provide you with deeper insight into the three main characteristics of alternative investments. It is my hope that the information I share will help you make a confident an educated decision, particularly with regards to:

1. Return Efficiency
2. Potential for Downside Risk Protection
3. Correlation to Traditional Market Risks

Return Efficiency.

The return efficiency of a good alternative investment is best measured by adjusting the raw return for the amount of return variability. Investors frequently use the Sharpe Ratio to make this calculation.

This Sharpe Ratio is a measurement of the excess return (or risk premium) per the unit of deviation in investment assets or trading strategies. This is typically referred to as “risk.”

An added benefit of using the Sharpe Ratio, is that it makes “absolute-return” outcomes easier for you to compare.

When seeking an alternative investment, you should always try to find the investments with the most efficient return profile. This will result in proportionately higher returns without the burden of uneducated risk, and will therefore deliver a great investment experience, and more capital over the long-term.

All things considered, a higher Sharpe Ratio should be a goal whenever investing in alternatives.

Potential for Downside Risk Protection.

Downside risk protection is the second characteristic that you need to carefully evaluate.

When evaluating the downside risk, you should always try to identify asymmetric return distributions. These are returns which are skewed more towards the upside, rather than the downside, and do not characteristically experience large drops in performance.

The asymmetry you seek are often found in the flexibility of alternative strategies.

Correlation to Traditional Market Risks.

The third and final characteristic that you need to evaluate when studying alternatives is their ability to deliver a revenue stream that is different from traditional investments.

By correctly understanding traditional market risks, you will be able to determine whether or not the investment can provide you with sufficient diversification, and protect you from the traditional investment risks in your portfolio.

Investors should always seek-out lower correlation investments to protect their capital from the poor returns experienced in traditional markets; like stocks and bonds.

When taking your first steps into the alternative investment market, you may want to begin with a single investment that is already completely diversified, and has proven it performs well in all types of markets. These kind of investments offer a nice balance of risk and stability over longer periods of time, serving as an excellent launching pad for any new investor.

Where Do Alternative Investments Fit Into Your Portfolio?

After the poor performance of funds in 2008, and subsequent failure of many other alternative investments, it’s understandable that investors would be wary.

In the past, investors’ portfolios have been dominated by public equities and bonds. The risks associated with the equity portion of those investing portfolios has typically come as a result of exposure to traditional investments. That said, the severe financial crisis of 2008 (and into 2009) clearly demonstrated the dangers associated with the traditional approach to investing, and led many investors (including institutions) to search for nontraditional investment offerings.

Although it is almost impossible to define the perfect alternative investment, if I had to it would be an investing opportunity where I consistently enjoy positive returns, low volatility and low correlation to traditional investment offerings.

the perfect alternative investment

The perfect investment will consistently produce positive returns, experience low volatility and offer little to no correlation to traditional investments.

As a result of the asset management industry’s positive performance over the 10+ years, there are now a number of interesting and appealing investment opportunities that cannot easily be classified as one of the 10 core asset classes. This has prompted investment firms/managers to introduce and additional one – alternative investments, making it a total of 11 different core asset classes. Many analysts agree that this provides much clearer and more efficient information about asset allocation.

There are some investments that are clearly alternatives, given that their correlation to the other recognized asset classes is negligible. It is this lack of obvious correlation to other (traditional) asset classes that as savvy investors, we favour most about alternatives. This has proven to be very useful in avoiding financial disaster, particularly when equity markets are falling such as they did in 2009, 2011 and again in 2015.

Albeit the conventional justification for alternative investments has been their ability to effectively diversify against core equity and fixed-income allocations, please allow me to offer a strong word of caution … Not all alternative investments are guaranteed to experience low volatility. Some alternative offerings will generate high returns, but are subject to an aggressive investment approach that involves much more risk.

That said …

The biggest risk is not taking any risk … In a world that is changing really quickly, the only strategy that is guaranteed to fail is not taking risks. – Mark Zuckerberg

biggest risk is not taking any risk mark zuckerberg

Like a growing number of investors, I have begun to place much more emphasis on the value of alternative investment strategies, particularly investing in real estate, and have discovered that they can be very useful in helping me to achieve my long-term investment goals. That said, my greatest admiration for investing in alternatives can perhaps be best explained by the excitement I feel, having them in my portfolio.

Alternative Investments Appeal to Savvy, Confident Investors

In search of a better return on investment, while protecting against stock/bond volatility, savvy investors confidently invest in alternative investments.

Seeking greater return on investment, while shielding portfolios from the volatile nature of stock and bond trading, wealthy investors continue to invest in alternative investments. If you fancy yourself a savvy investor and you have the tolerance for risk, non-traditional investing options are an appealing alternative to stocks and bonds.

The Alternative Investment Landscape

Further examination of the ownership and sourcing of alternative investments, as well as the use of private equity investing, the Spectrem Group’s latest perspective report: Use of Hedge Funds and Private Equity in the Portfolios of the Wealthy; uncovered that:

  • The average investment for the US$25 million investor ranges from US$3.5 million for private placements to US$12.6 million for hedge funds.
    Ownership of alternative investments increases with an increase in wealth and decreases with increasing age.
  • Hedge funds receive more money from alternative investors than any other class of alternative investments, particularly from those with a net worth of US$25 million or more.
  • While 42 per cent of investors with a net worth over US$25 million own hedge funds, 69 per cent of investors with a net worth of US$125 million or more are invested in hedge funds.

alternatives higher rate of return diversified portfolio

Utilisation of alternative investments increases as wealth increases, and advisors should recognise the opportunity to introduce alternative investments as an investor’s net worth grows … Investors who find alternatives attractive are looking for a higher rate of return and a diversified portfolio of investments. – George H. Walper, Jr., President of Spectrem Group

Albeit the statistics are positive and are cause for excitement, many amateur investors struggle with finding their place in the alternative investment marketplace. In order to find the answer, investment-seekers must be acutely aware of how knowledgeable they are with regards to non-traditional investments, as well as truthful with themselves about what their tolerance for risk is.

Are You Investment Savvy?

Of those investors who considered themselves to be “very knowledgeable” about investments are more likely to have alternatives in their portfolio than those who do not (37 per cent versus 24 per cent). On the other hand, those who consider themselves only “fairly knowledgeable” about investing are more likely to not include alternative investments (61 per cent versus 53 per cent) in their portfolio.

What is Your Risk Tolerance?

Compared to other investors, those who are investing in alternatives are more likely to describe their risk tolerance as “aggressive” or “most aggressive,” than those who do not invest in non-traditional options.

In the study, 40 per cent of ultra-high net-worth investors who owned alternative investments, identified their risk tolerance as “aggressive,” compared with 39 per cent of those who describe their risk tolerance as “moderate,” and 11 per cent who reported their risk tolerance as “conservative.”

In Conclusion.

Investors who have carefully assessed the risk all of the more traditional opportunities for investment and have made the decision to begin to investigate the market’s niche alternatives, that have consistently demonstrated low correlation and strong returns despite a volatile and challenging economic times, have succeeded in diversifying their holdings, eliminating unnecessary risk and positioned themselves for long-term financial security and success.