Many readers may be familiar with the amusing recipes for a “Happy Home” or a “Happy Marriage” often published on trendy wooden home décor signs or tucked in the pages of the feel-good homey magazines. Ingredients usually include things like a cup of love, a pint of kindness, two spoonfuls of laughter, and a dash of trust. With that spirit in mind, following is a recipe which may increase your odds of reaching your investment goals.
The first thing to remember is to have a well laid out plan and an end-game in mind. What is it that you are looking to do? What is it that you are looking to create? How long do you have to prepare? Certainly you would take out a certain set of ingredients if your goal was to make pineapple upside-down cake and a completely different set of ingredients if you were making Cincinnati Chili. Proactively define financial goals and objectives so the appropriate resources can be directed towards achieving those goals. As Benjamin Franklin reminds us, “If you fail to plan, you are planning to fail”.
Several ingredients will help improve your chance of financial well-being. Time should be added in great volumes. Compounding is the ability of an investment to generate earnings from previous earnings. Time can be an investors best ally. Get an early start and begin investing as soon as possible.
Patience and perspective should also be included as a key in- gredient. Yes, you may drop an egg on the floor, burn your finger on the stove, or the pot might boil over. It might get messy from time-to-time but keep the end result in mind.
Consistency is also an important ingredient. Investing on a regular basis and establishing a systematic and regular investment is paramount to increasing your odds of investment success.
Adding too much of one thing can be harmful and a single in- gredient in-and-of-itself may not be good but its true benefit may not be fully realized until mixed with other ingredients. This is called diversification. Equally important to remember is what ingredients should be avoided. Avoid excuses as they can poison, emotions which can pollute, and market timing which may be toxic to the recipe The interesting thing about this recipe is it is Grandma’s rec- ipe. The financial services industry often makes investing too confusing and the financial media often focus on those things that are far secondary to those things that we can control and have a far greater impact on our investing success and financial health. Adam Smit is CERTIFIED FINANCIAL PLANNER™ with Adam Smit Investment Management LLC and a registered principal of LPL Financial. This article is for general information only and not intended to provide specific advice or recommen dations for any individual. All investing involves risk including loss of principal. There is no guarantee that a diversified portfo – lio will enhance overall returns or outperform a non-diversified portfolio. Securities offered through LPL Financial. Member FINRA/SIPC.
BY ADAM SMIT