The Wealth-Building Strategy Most Investors Miss – Plus, 5 Must Knows For Monday, October 16th
What does it really mean to be “balanced”?
To have a balanced life… To use a balanced investment strategy… To keep a balanced diet… To balance spontaneity with planning and preparation… To balance your personal budget… To be a balanced parent…
“Balance” is on my mind today after a full family weekend that included homecoming for one of my daughters, helping my son with college applications, a 38 mile bike ride, a trip to the local pumpkin patch, a few hours of market research, and a little bit of sleep here and there.
Today, before we get to the 5 things you need to know this week, I want to talk a bit about the importance of balance in your portfolio, and how it can help protect your wealth the next time the market trades lower…
Balance is a Moving Target
As a father of seven, it seems that balance has been an elusive challenge.
I want my kids to eat balanced meals so they grow healthy and strong. I want to balance fun times (and making lasting memories), with teaching my kids responsibility. Lately, my 17-year-old son and I have been discussing his balance between working to earn money (something he’s becoming more motivated with), and working to keep his grades in good shape.
I’m reminded of a statement I heard from a pediatrician many years ago.
“Balance is not something that happens at any one point in time. It’s a target that you shoot for over a period of weeks or months.”
That’s an important distinction in life and in markets…
You don’t balance a fun trip to the pumpkin patch by trying to teach the kids work ethic while you’re on the hayride. And while there’s nothing wrong with making homework “fun,” my kids still need to finish their assignments whether they enjoy it or not.
At our house, a balanced life is more about living life fully and being engaged in the moment (whether that moment is a family dinner, completing some chores, or learning to drive a car).
There are some great parallels that we can draw to the value of keeping a balanced portfolios, and the methods that different investors use to protect their wealth over the long haul.
Keeping Your Wealth Protected In Any Environment
“I’m thinking if I get a two or three bedroom cabin with a view, I should be able to rent it out about 25 weekends out of the year.”
I was chatting with a training friend of mine early Saturday morning halfway through our bike ride. After maxing out his company’s 401(k) program and his IRA account, James is looking for a way to balance his investments into something that is outside traditional financial markets.
“Even if the market pulls back, I still have something tangible with value.” James said. “I could even work from my cabin as long as I can get a good internet connection.”
The idea of investing in an income-producing piece of real estate makes a lot of sense today, in keeping with a “balanced investment” theme.
It’s not that stocks (or bonds for that matter) are bad investments right now. Even with the markets at historic highs, there are still some great dividend stocks that are great income opportunities…
But considering the fact that the U.S. stock market has been moving higher for well over eight years, it makes sense to “balance” some of your wealth, moving a portion out of traditional stock investments.
That’s why I’ve been encouraging you to put some of your wealth into non-stock opportunities, such as bonds, gold, real estate, or our instant income strategy (Income on Demand.)
During times when the market is trading at rich valuations and hitting historic highs, a smart “balanced” approach is to steadily sell some of your winning positions and use that cash to buy non-market opportunities.
On the other hand, during periods where the market pulls back (as we’ll probably see sometime in the next few years), a smart “balanced” strategy would be to sell some of your gold or other non-market investments and use the cash to buy cheap undervalued stocks.
It’s not necessarily about having an equal balance against all different opportunities at any one point in time. It’s more about balancing your investments to match the opportunities and risks in the market throughout different economic and market cycles.
It’s important distinction that can make a big difference when it comes to how much wealth you can save (and protect) for your retirement. And that’s why here at The Daily Edge, we’ll keep an eye on market opportunities – and non-market opportunities – to help you keep your wealth growing in any market environment.
Here’s to growing and protecting your wealth!