Whether it is the year 2011, 2012 or 2020, here is a good investment strategy to make money investing without a crystal ball. Any good investment plan considers both the selection and the timing of the investment. If you cannot make money investing with this simple strategy, rest assured that only a few and the lucky ones will make money.
Before you stress on crafting a good investment strategy for 2011 and moving forward, ask yourself the obvious question. Where do the most successful people invest (or have they done so in the past) to make money investing for the long term? The answer before the financial crisis was bonds, stocks and real estate. The current answer for the average investor is the same and takes the simple form of bond funds, stock funds, and real estate stock funds. In the final analysis, if these three investment areas stagnate, we are likely to be in a depression and only a lucky few or smart speculators will make money investing.
A good investment strategy is not based on speculation or trying to synchronize the markets. No matter what you hear, no one has a proven and consistent track record of market timing that significantly outperforms markets in the long run. If they did, they would make a lot of money investing and they would hide their secrets, they would not share them. So why not settle for a good investment strategy that only makes one important assumption – that America will grow and prosper in the long run?
Investing money in the above three areas is simple with mutual funds. To reduce your risk and add flexibility to your investment strategy, add a fourth type of fund called a money market fund. At current interest rates, these may not seem like a good investment, but they are safe and carry interest that follows current rates. To be more specific, by owning only 4 different funds, you can put together a good investment strategy for 2011 and beyond and make money investing in America’s future. To go from high security to higher risk and higher earning potential: All you need is to own a money market, a mid-term bond, a large-cap equity income, and an equity real estate fund.
A good investment strategy to get your feet wet is to simply invest the same money in all 4 funds. The timing strategy requires no judgment or guesswork. One year later and once a year after that, simply move the money around so that all 4 funds are the same value again. This automatically forces you to take some money off the table of your top-performing funds and transfer more money to the ones that didn’t do so well. The net result over time is that you are buying more stocks when prices drop, you are selling stocks that are relatively expensive.
This is also a good way to make money investing long term while controlling risk. Simply buying and holding funds is not a good investment strategy and has caused problems for many average investors in the past. For example, real estate funds were good investments for several years until they were nailed by the financial crisis. Had you had them and simply kept them, by 2009 you could have had a significant amount of money accumulated and at risk there … resulting in huge losses as a result of the financial crisis.
There is more than simplicity involved in what I call a good investment strategy for 2011 and well beyond. This strategy employs two of the only time-tested tools in the investment business: BALANCE & REBALANCE and DOLLAR COST AVERAGING. The first tool keeps you on track while controlling risk, and the second is the tool that works to lower your average investment cost by getting you to buy more stocks when prices are lower and less when prices are high.
You can combine a good investment strategy with moderate risk if you own only 4 different mutual funds. People make money by investing long-term in bonds, stocks, and real estate; And the smart ones also put some money in a safe investment for flexibility. In years past, some people just got lucky and made money investing without a strategy. With a good investment strategy, you won’t need to cross your fingers and rely on luck. If America thrives in 2011 and beyond, so should you.
