Once you have an investment plan, a solid, proven winner for an investment plan, it is imperative that you stick with it for profitable safe investing. Putting together a good plan is just like preparing dinner, you have to:
- Figure out what you want
- Stocks, ETFs, or Mutual Funds
- Check the ingredients
- Which group of stocks, mutual funds, or ETFs are right for you
- Do some research for the best recipe
- Choose the right method of analysis
- Back test to find the best strategies
- Set aside Prep Time
- How much time do you have to develop your strategies
- Cooking Time
- How frequently do you plan to manage your investments
- How much time do you have to spend managing your investments – minutes or hours…and will you manage it daily, weekly, or monthly.
Don’t be swayed, Stick with your plan. Consistency is important in a investment plan, but it doesn’t mean you buy something and then hold it until someone dies; whether it’s you or the stock you are holding. Consistency means developing a plan based on a recognized means of analysis (e.g. relative strength momentum (RSM) or alpha), analysis that has a variety of tested buy/sell signals and perhaps even a signal to exit the markets entirely.
If you create a plan with half a dozen different groups, and for each of these groups you have two or three strong strategies you will achieve both diversification and a high degree of safety. You’ll also have an investment plan you can stick with because it is:
- Based on your personality
- Formed with your time constraints in mind
- Aimed directly at your own objectives
- Made up of stocks, ETFs, or mutual funds that you are willing to consider (and remember: you can add more groups whenever you want to)
- An investment plan built on strategies back tested for both buying and selling
It is important when creating your groups of Mutual Funds, Stocks, or ETF’s not to settle on just one strategy. You need to have two or three trading/selling strategies for each group.
Experience says that instead of having one strategy for each group, you should broaden your strategies to two or three through back testing. Switching from one strategy to another can be a very shrewd move because there are times when one group strategy will perform better than another depending on the economic climate.
Because you have developed more than one strategy you will find that: one of the strategies may work very well in volatile markets while another strategy many excel in stable markets. If you have a few different strategies for each group then you won’t have to guess what is best in today’s market – your strategies will tell you – it’s that simple.
When you let your proven strategies guide your decision-making, it is a lot easier to stick with your investment plan for buying/selling/or exiting the market. Thus you will not be swayed by your emotions, swayed by what you see or hear on the news, or swayed by advice from your well-meaning family and friends, but guided by proven investment strategies.
Dominick is the designer of the investment program Dynamic Investor Pro, an investment software used by individual investors and professional investment advisors for stocks, ETFs or mutual funds and the author of the book, Invest Safely and Profitably.