Three Secrets to Greater Wealth

There is no secret formula or magic pill to help you lose weight. I’ll say that again.There is no secret formula or magic pill to help you lose weight. We all know how to do it. Well Sparky, you may be saying to yourself right about now, “I don’t know the secret, or I would be 40 pounds lighter!”

Ah, but it is simple….diet and exercise. It’s just easier said than done.

Creating wealth is exactly the same. There is not a newsletter, a secret formula or book that will really make that big of a difference. It really boils down to three things: philosophy, strategy, and discipline. The best portfolio returns go to those individuals that have a sound philosophy, create a plan based on the philosophy, and (my favorite word) diligently follow the plan. Like dieting, easier said than done.

I cannot tell you the number of portfolios that I reviewed that typically lack philosophy, strategy, and discipline. Many of these portfolios were poorly constructed by financial advisors that did not have a philosophy or strategy themselves. Investor portfolios are veritable buffet of randomly collected holdings that have no relationship to each other, except maybe they were a hot idea from the past like pet rocks and mood rings.

What’s really sad about this is that many investors have underperformed substantially, and it could have been avoided. I can usually tell them when and why they bought some of the securities when they did. Sometimes, I’ll ask, “I bet you bought this tech mutual fund in 2000, right?” How do I know? Because those are the things undisciplined investors do at the same time! When you compare their performance with a simple index, that’s when they see just how bad it really has been.

So how does an investor get this discipline? Two ways. First, you can become my client! Bet ya didn’t see that one coming. Some shameless promotion is allowed, right? Second, follow this three step plan for greater wealth. Like I said before, easier said than done.

1. Have a long-term philosophy:
Know that it is time in the market, not timing the market. Nobody knows when things will go up or when they will go down. I tell people that ask me to please get them out before a decline, “sorry my crystal ball is in the shop.” Anybody that says they can predict this stuff is just lying. Any money that you don’t need for at least 5 years is long-term and should be treated as such.

2. Develop a strategy based on your investment philosophy:
Developing a strategy can be easier if you work with an independent wealth advisor. Create an asset allocation that reflects your tolerance for risk. Only change your mix if you get closer to the goal, or your risk tolerance changes significantly. You’ll know the strategy is working if your returns start to even out, and there are not unusual highs and lows. 

3. Stay disciplined
I am a pretty disciplined person. I love checklists and routines in my life and work. I learned these great habits in my time in the Navy. Therefore, I don’t waiver when the seas are rough and volatility increases. It will pass. Don’t let emotion get the best of you. Don’t give in to the get rich quick, or the doomsday sayers. And for once, have the patience to let your investments do their job!

Philosophy, strategy and disciplined are the keys to successful investing and wealth creation. Good returns will go to those investors that are willing to have a strategy and stick to it regardless.

Three steps that sound easy, but are extraordinarily difficult to implement and maintain. Sometimes you need a buddy to work with to lose weight. If you would like a partner to help increase your wealth, write me at david@lexwealth.com, or call me at (859) 225-2596.