Hard Times and Scarce Money Have a Long-Term Mindset With Investments

Have a Good Plan and Stick to It

As the old saying goes, if you don't know where you're going, any road will take you there. Solution? Have a personal investment plan or policy that addresses the following:
- Goals and objectives - Find out what you're trying to accomplish. Accumulating $100,000 for a child's college education or $2 million for retirement at age 60 are appropriate goals. Beating the market is not a goal.
- Risks - What risks are relevant to you or your portfolio? If you are a 30-year-old saving for retirement, volatility isn't (or shouldn't be) a meaningful risk. On the other hand, inflation - which erodes any long-term portfolio - is a significant risk.
- Appropriate benchmarks - How will you measure the success of your portfolio, its asset classes and individual funds or managers?
- Asset allocation - What percentage of your total portfolio will you allocate to U.S. equities, international stocks, U.S. bonds, high-yield bonds, etc. Your asset allocation should accomplish your goals while addressing relevant risks.
- Diversification - Allocating to different asset classes is the initial layer of diversification. You then need to diversify within each asset class. In U.S. stocks, for example, this means exposure to large-, mid- and small-cap stocks. Your written plan's guidelines will help you adhere to a sound long-term policy even when current market conditions are unsettling. Having a good plan and sticking to it is not nearly as exciting or as much fun as trying to time the markets, but it will likely be more profitable in the long term.
Source: http://www.investopedia.com/articles/stocks/07/mistakes.asp; http://www.tuckerbrook.com/