Once
you understand where you are, you can begin focusing on how much you need to save for each goal and what types of
investment returns you need to
meet your goals.
Take
a holistic approach to your investments. One common mistake investors make is to compartmentalize their investments.
They identify a single
issue, resolve it, and then move on to the next issue. They fail to examine the big picture when making financial decisions.
As a result, they make a
series of bad decisions instead of one good one.
Distinguish
between short-term investments (emergency cash reserves) and long-term investments (ex. Retirement, buying a beach
house).
A
long-term investment plan always begins with asset allocation. i.e. What percentage of your investments should go into which of
the 19 asset classes such as
stocks, bonds, cash, real estate, gold, oil & gas, government securities, sovereign debt, corporate bonds, small cap stocks, large
cap stocks, growth stocks,
value stocks, emerging markets.