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You Can't Become Rich In Your Pocket Until You Become Rich In Your Mind | ||||
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Strategies that had guided people on how to invest in the market were up for grabsThe American public lost confidence in corporate America and the stock market. Suddenly the basic ideas, concepts, and strategies that had guided people on how to invest in the market were up for grabs. Funds that bet against our countrys great companies were cleaning up. Many reaped returns of up to 70 percent or more in 2001 and 2002, largely by short sellingessentially by betting that shares would fall. The Prudent Bear fund was one of them, posting a whopping 57.6 percent return from January 2002 through early August of 2002. So what do you do? How do you make sense of the financial world when confusion reigns? Do you put all your money into the most recently anointed safe havens of gold, real estate, natural resources, and emerging markets? Or do you stay with your current diversified buy-and-hold strategy? Is active or fixed allocation right for you? Unfortunately, neither I nor any other financial expert can claim to offer a perfect formula to help every investor through the next storm. But what I do know is that this kind of turmoil is exactly why you need the very clearly designed investing game plan that this book will help you get. A good game plan takes into account your personal and financial situation but also is nimble enough to respond strategically to changing conditionsbe they internal in your own life or external in the market. Readers of this book are all ages, have a variety of occupations, and aspire to different dreams and goals. Some have little or no money, and some have millions. Regardless of your situation, everyone needs a wellthought-out investing game plan. Take this 10-step process one step at a time and youll have a plan that will last a lifetime. Here are just a few of the questions the 10 steps will address: How do I get my emotions to work for me, not against me, when it comes to investing? How do I figure out how much risk I should take? How do I figure out my goals? How much of my portfolio should be in offense, and how much in defense? Should I use mutual funds or individual stocks and bonds? Should I use index funds or actively managed funds? How do I figure out which funds to use? Who are some of the best fund managers? What are the best fund families? How do I track my investments to make sure theyre working for me? Do I have to buy and hold? In addressing these questions, the key insights in this book arent drawn solely from academic research. When I manage money, Im not just focusing on numbers. Neither is any other Certified Financial Planner or advisor who is worth their salt. I see money and the people who own it as intrinsically connected. Its up to me to synthesize an individuals goals, risk tolerance, and his or her money into a workable investment game plan. As a Certified Financial Planner, Ive been trained in holistic financial planning to do this, and Ill share this broad approach to addressing the variables of your situation as we begin planning your game plan together. Though I will present the most compelling theories and studies on investing, my perspectives are ultimately real-world perspectives. They come from experience gained in the mud of the marketplace and from working with real people as clients. There are no untested hypotheses here, just tried-and-true experience. Through my experience, Ive framed a 10-step approach to getting an investing game plan, with the steps grouped in three parts: Invest in Yourself 1. Get thegame plan mind-setcommitment, consistency,courage. 2. Know your risk tolerance. 3. Know your goals. Create a Game Plan 4. Get the fund fever. 5. Get an offense and a defense. 6. Pick the players. 7. Know your team. 8. Get to know the players. Stay the Course 9. How ya doin? 10. Write it up! Finally, for those who suspect they can use some assistance in getting an investing game planand for reasons Ill describe later I think almost anyone can benefit from good, unbiased advicethe final chapter discusses how to seek out and size up financial advisors. The Big Picture This book, then, is about the 10 steps to a successful investing game plan. But investing is only part of your financial life. It may well be the most important part of your financial picture long-term. But its only part. Here are seven other parts: 1.Cash Flow Planning. Where does your money for daily living comefrom, and how is it being spent? 2. Tax Planning. More than filing a tax return, this area includes is sues like whether to invest in a traditional or Roth individual retirement account (IRA), how much tax you save in a 401(k) plan, and whether you should use a Section 529 educational savings plan. . Retirement Planning. Some people prefer to think of retirement planning in terms of financial freedom or independence from an employer or from worry. Whatever it means to you, living without a fresh stream of steady income takes advanced planning. 4. Estate Planning. Youve poured your lifes work into building an estate, and you need to do some planning to protect and distribute it. Estate planning is all about who you want to get what and when, and how you can avoid giving it all to Uncle Sam. 5. Insurance. Insurance covers all areas, including life, health, cars, other property, potential liabilities, and long-term health care. This is a big, complicated, and important subject. . Special Issues. This catchall category includes things like providing for education, elderly parents, disadvantaged kids, and gifted kids. 7. Life Planning. This is a subject thats financial not in its core but in its reverberations. It includes life changes like a career change or moving to a new location. Take a moment to think about each of these areas in your own life. If there were a spectrum between where you are and where you want to be, what would it look like? and the target represents issues that still need to be resolved in each area. Mapping each factor this way triggers a process of identifying your needs and beginning to address them. Though each issue is a separate line, they all belong on one chart. Its the interaction among these several parts that ultimately makes the whole financial planning process work. Just as in football, basketball, or soccer, each player has a position; it is the interaction of the team members that determines the teams success. This book focuses on one particular part of the pictureinvesting. But as I discuss the investment game plan, Ill make clear how it can impact the other areas of your financial life. Throughout the past three years, my office has been inundated with people who called looking for advice after losing money. I asked each of them the following question: Did you have any kind of written game plan? Not one did! I want to make sure that doesnt happen to you. So lets get started on yours! |
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