Investment Essentials

The stock market has outperformed almost everything over the past decade! Contrary to popular belief, the market works! The trick is knowing how to win the game! Here are the facts: the stock market has shown steady long-term growth, the market is volatile, returns are impossible to accurately time or predict, and there are winners and losers but no one know who is who. Short term investing produces higher risks, and emotional decisions usually produce catastrophic results. Winning in the market takes several things: discipline, a solid investment strategy, an understanding of historical performance, spreading the risk with asset allocation, and long-term perspective!

"One of the funny things about the stock market is that every time one person buys, another sells, and both think they are the astute investors!"

William Feather

Play the most popular FREE stock market game on the Web!

Sometimes the best way to learn something is to do it! Click on the icon above (How the Market Works) and play the stock market game without investing any of your hard earned money.

US Market Rates:

How do I find the right Advisor?

Everybody has the best plan, their opinion is best, and they have a "fool proof" system for investing. Obviously this isn't the case, so what can the average investor do to improve their odds! Finding the right advisor isn't easy unless you know what questions to ask. Here are a few you might try:

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Critical Investment Components:

Developing a Market Strategy

How do I choose the right market strategy for me? Here are a few ideas:

1) Is the strategy focused almost completely on market gains? (Gains are fun to talk about, but managing market losses is

equally important!)

2) Is the strategy based on your advisor's knowledge or on someone else's opinion? (knowing enough to analyze historical performance and market data is a critical skill set).

3) Is the strategy balanced and diversified? (does the strategy help to decrease volatility and minimize risk in your portfolio).

4) Are the combined fees on the account (management fees, transaction fee and advisor fees) less than 3% of the overall return? (many say they are only paying 1%, this is just their advisor's fee).

Predicting the Market:

The stock market is random and unpredictable. However, there are some who believe they can master anything, and to those of you who are wired this way, we have provided the following exercise or test.

Test Yourself!

If you could have invested $10,000 in the stock market in 1933, and you could choose one of the companies listed here, which one would you choose?

They say hindsight is 20/20 so you are getting the benefit of knowing most of these companies and their track record over the past 85 years!

Limiting Market Losses

Limiting market losses combines many different disciplines. First, historical performance can help us to see trends and to learn from the past Things like diversification, dollar cost averaging, and our risk tolerance can help to spread the risk and decrease volatility. The stock market works, but consistently capitalizing on this information is the real challenge!

Risk Vs. Opportunity

Balancing risk and opportunity is a lot like walking a tight-rope, one misstep can make a major impact on our portfolios. Some accept the risk of going it alone. There are many studies that prove this to be a mistake for most of us. The average person who is investing their own money (unassisted) should expect a return of roughly 3.6% to 3.9%, compared to those who hire an advisor (assisted) who generally receive 5.4% to 5.7% NET after all fees are paid.

Building Self-Completing Plans:

Your Financial Plan has multiple components, all of which are important for you to become financially self-reliant. Budgeting and debt elimination are the catalyst, risk management and the building of emergency savings must be incorporated, retirement savings and investing are also very important aspects of this plan, but all must work together if you are going to reach your retirement and estate planning goals. If we were to leave out life insurance and disability, the plan could be compromised, just like leaving out any of the other things mentioned above.

Ask an M3 Wealth Financial Cartographer how to build a self-completing financial plan!