For most investors, the Investors’ Dilemma remains undefined and continues over a lifetime. The first step toward operating outside of this cycle is becoming aware of it and you have already done that (if you haven’t done that read the previous blog “Understanding the Investors’ Dilemma”). The next step is to choose an investment philosophy in which you believe. An investment philosophy is made up of three fundamental principles: your True Purpose for Money, your Market Belief, and your Investment Strategy.
The first part of choosing your investment philosophy is to develop a True Purpose for Money. This is a statement of the most important value that you want to express through the way that you use money; it is the thing that is more important than money itself. What fundamental value will drive both your investing decisions and your spending decisions going forward?
The second is to develop a Market Belief by identifying what you believe about how markets work.
The third part is to develop an Investment Strategy which is a plan to create and maintain your investment portfolio.
When you combine these three principles—your True Purpose for Money, your Market Belief, and your Investment Strategy –you have outlined your Personal Investment Philosophy.
Your true purpose for money articulates the underlying values and priorities you want to address and the commitments that you wish to fulfill through the use of our money. Most people are comfortable talking about goals or specific achievements that they want to accomplish with their money. But underlying these goals is a deeper and more meaningful value that drives the goals.
Money itself does not bring happiness and peace of mind. One needs only to follow the lives of recent lottery winners to bear this out. We all need a foundation.
Next week we will review the second step… Choosing your Investment PhilosophyTMJoin me this and every Saturday morning at 10AM for "it's Your Money", part of Coaches Corner, Saturday Morning Street Smarts, on Newstalk Radio, WBLF, 970 AM. Call in during the show: 814-272-9700 or send me an email: firstname.lastname@example.org Paul Nichols The Investor Coach