Aside from emotions, great independent investors know how to balance their investments, too!

Wednesday: The Independent FROM THE DESK OF MILES EVERSON: It’s a smart move to invest in the stock market. However, as an independent professional, it’s also not completely wise to put ALL your savings into stocks. Why? It’s because despite the long-term benefits, stock ownership and stock prices also have their “ups” and “downs” along the way. Keep reading to know how you can determine the right plan and the right strategy for your long-term investments. CEO, MBO Partners Chairman of the Advisory Board, The I Institute

Aside from emotions, great independent investors know how to balance their investments, too! According to the book, “Investing Disciplines of the Giants,” you have 3 main choices when allocating your saved money. These are called “asset classes.” Cash or Cash-Like Savings This is where you put your money in the bank or with governments so that you can access your cash immediately. Savings accounts, certificates of deposits (CDs), and money-market securities fall under this category. Bonds This involves loaning money to companies and governments with the expectation that they will pay you back after a longer, fixed period of time and with interest. Equities Allocating your money through equities means giving money to companies in exchange for owning a percentage of current assets and future profits of those businesses. Stocks are the easiest way of gaining equity. When you strategize how you will balance your money among these three groups, you’re doing “asset allocation.” Wait a minute. Why are we talking about asset classes and asset allocation all of a sudden? It’s because the third investing discipline tackled in the book is this: BALANCE INVESTING TO FIT YOU! This discipline requires independent investors like you to spend a portion of your time planning and strategizing about how you’ll wisely allocate your savings. To know how much you should invest or whether or not you should invest in each group mentioned above, you have to identify the asset class that is most specific to you, your lifestyle, and your spending needs. Just like what American investor, Walter Schloss, said, “When it comes to investing, my first suggestion is to first understand your strengths and weaknesses, then devise a simple strategy so that you can sleep at night!” It’s important that you put in enough effort to make your allocations fit your life and intentions. A lot of investors will tell you that this part really requires upfront time and thought with your own periodic review. The good thing about this discipline? The choices you have to make are not that difficult! In fact, they are very specific to you―no one can tell you exactly how much you should invest in stocks, bonds, or cash-like savings. The ultimate decision lies in your hands because you’re the only one who knows you, your current financial status, etc. Now. Since we’ve been focusing about cash a lot in today’s topic, you might be wondering, “What about other assets like real estate, art, gold, or even new categories like bitcoin?” To answer that question… The core of investing still remains with cash-like savings, bonds, and stocks AT THE MOMENT. Then, as we witness how the industry progresses from time to time, more sophisticated approaches may include these other types of ownership. Besides, we’re not just here to talk about the different types of ownership. We’re also here to guide you in creating an emotion-free, comfortable strategy that maximizes your wealth creation. “A good investment strategy relies not on excitement or hope for unrealistic gains. It is simply a discipline in properly balancing one’s investments across cash instruments, bonds, and equities.” In the next few articles in this series, we’ll be elaborating further on the three main asset classes as well as volatility and some misconceptions about making an investment. Hope you’ve found this week’s insights interesting and helpful. Follow us on LinkedIn. Stay tuned for next Wednesday’s The Independent Investor!