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Everyone seems to be keeping a close eye on the stock market to see if it has "bottomed out." In the late 1990s, the same people watched the market to see how much their net worth appreciated each day.
Unless you are a professional money manager, your best strategy in either economic climate is to develop a long-term investment plan and stick to it.
An effective investment plan ...
* Establishes attitudes, expectations, objectives, and guidelines for the investment of assets
* Creates the investment structure (e.g., asset classes, management styles, asset allocation) for managing assets
* Provides formalized criteria to monitor, evaluate, and compare performance results
The importance of having an investment plan is more apparent when you see the mistakes that are made by not having one.
Set Goals and Objectives
Develop an investment plan as part of your overall comprehensive financial plan.
Common mistakes: I want to make a lot of money; I don't need to base my investment plan on my goals.
Your investment needs and goals are very different from someone else's. Instead of just saying you want to make "a lot" of money, quantify your goals in order to develop a meaningful investment plan. Your goals can impact the time horizon and how much you need to accumulate. You might need to invest more aggressively if, for example, you want to retire early. But others may not need to invest as aggressively.
What to do: Make sure your investment plan complements a comprehensive financial plan and encompasses ...
* Retirement planning
* College funding
* Providing for your family in the event of death or disability
* Estate planning
Diversify Your Portfolio
Studies have shown that asset allocation is …