By not following some very important and simple rules for managing your portfolio, you risk having your portfolio manage you. As a result, you could make costly errors, or worse yet, lose your financial control, independence and security.
What are the important and simple rules you should know and follow in order to build and manage an optimal portfolio and make the most of your investments?
"From my experience, I have discovered some very important rules that enable investors to gain an edge over other investors." says Scott Frush, president of Frush Financial Group and author of Optimal Investing: How to Protect and Grow Your Wealth with Asset Allocation ($27.95, available by calling 1-800-247-6553). "These rules are the foundation for becoming a highly successful investor and building an optimal portfolio."
Here Frush offers 15 golden rules to help you build your optimal portfolio.
1. Allocate your assets properly. How you allocate your assets, rather than which individual investments you select or when you buy or sell them, is the primary determinant of your investment performance over time.
2. Establish your specific financial goals. Knowing your goals allows you to design a portfolio that provides the best chances of attaining them.
3. Make your goals realistic, achievable and measurable.
4. Identify your true risk tolerance. Make sure to address both your ability and willingness to tolerate risk - both are different concepts.
5. Understand the fundamental characteristics of each asset class.
6. Select your optimal asset mix. The driving force behind how you allocate the assets within your portfolio.
7. Focus on your portfolio as a whole rather than on the individual investments comprising your portfolio.
8. Diversify, diversify, diversify. Index funds provide a quick and easy solution. Diversification is a cornerstone principle of asset allocation.
9. Do not attempt to time the market.
10. Identify and incorporate tax implications into your decision process. However, remember that suitability takes precedence over tax implications.
11. Understand that recent returns are no indication of future returns.
12. Invest for the long-term. Do not play the market.
13. Understand that investing is a process. It is not a standalone event.
14. Draft an Investment Policy Statement. Your formal plan in writing.
15. Remain committed to your plan.
With so many financial opportunities and risks, the management of your portfolio may seem daunting, but if you adhere to the rules above, you will manage your portfolio with success, rather than your portfolio managing you.
Editor's Note: To find out more, get the free and complete special report of the 15 Golden Rules for Building Optimal Portfolios or purchase your copy of Optimal Investing available at www.AssetAllocationExpert.com.
