How To Choose An Investment Strategy

financial planning, investment strategy, Gold Wealth Family Wealth, Westport, Connecticut

By Michael Gold, CFP®, MBA Founder & CEO – Wealth Advisor

People use the word, “strategy” in different ways, but it generally refers to a specific approach to solving a problem. An investor who defines a strategy makes a conscious decision to consider only opportunities that fit the overall objective.

Without a clear investment strategy, the number of choices can grow overwhelming and lead to confusion. In the financial world, there are no shortage of strategies, the key is to implement an effective strategy to help you pursue your goals. The hallmark of an effective strategy is clarity in your objectives and consistency and discipline in your resolve to pursue your desired outcome.

Values are the Guiding Star Of Strategy

At Gold Family Wealth we use what we call the Proven Process which always starts by asking our clients about their values – the things that drive them. Values do not change over time, although we tend to understand them more clearly as we mature.

The main question to consider: What drives you? If you did not have to work or worry about money, what would you be doing every day? The more specifically you can answer this question, the better you understand your value system.

Thinking about retirement and working backward in time to the present day, your goals and milestones will serve to paint a picture of how you envision fulfilling what matters most to you at a personal level.

Active Versus Passive Approaches To Investing

The next question to ask yourself: How much involvement do you want in the management of your portfolio? There is no right or wrong answer here. Think about whether you enjoy the idea of researching and learning about different investment vehicles such as stocks, bonds, and other types of securities.

Do you see yourself as the type of investor who likes being in control and seeing a complete picture? If financials are not your cup of tea, you might prefer a more passive investment strategy, which tends to require less frequent maintenance.

Risk Type And Tolerance

Risk is inherent to investing, and every strategy carries a different type of risk. Don’t fall prey to the notion that one strategy is inherently more or less risky than another.

Investing in stocks or mutual funds will tend to introduce greater volatility risk due to market fluctuations. Bonds tend to offer more stable returns but are not without risks of their own. Due to factors such as inflation, taxes and defaults, bonds or fixed income vehicles carry the risk of erosion to your capital and buying power over time.

Risk in the stock market tends to be shorter-lived, in even the grizzliest of bear markets. Actually, if you know what you are doing, bear markets can provide incredible opportunities to capitalize on investing in great companies at very attractive prices as well as become even more tax-efficient through a variety of tax strategies that present themselves in market downturns.

Time Horizons

A key factor to consider is your time horizon. If you plan to work for the next 30 years and then live another 20 or 30 in retirement, basically you have a 50-plus year time horizon and you should feel very comfortable and confident that you can withstand a greater degree of volatility in the short term in exchange for the possibility of higher long-term rewards.

To put this in perspective, I am 43 years old and the Dow closed at the end of 1977 at 831 – 43 years later the Dow is hovering around 30,000. Over my lifetime, I have experienced hyperinflation, the oil shortage with gas lines, the crash in 1987, the savings and loan crisis in the early ’90s, the tech bubble burst, 9/11, the financial crisis and our more recent COVID-19 pandemic.

In four decades, we have experienced many “apocalyptic events” as the financial news portrays and yet the greatest companies in America and around the world have grown exponentially. Keep this in mind the next time you have concerns about the short-term apocalypse de jour.

In contrast, if you need to access your funds in a very short time frame, maybe over the next one to five years, you’ll want to take a more conservative approach.

Take Our Risk Survey to Determine Your Investor Risk Profile

Tying It All Together

Start with the end in mind and take a moment to envision what exactly you are investing for. Do you want to ensure you have enough money to pay for college for your children? Do you want to ensure you can buy that second home? Do you want to ensure you do not outlive your money throughout your retirement?

Whatever your goal, start with the end in mind: How much you will need to afford these goals?

Then reverse engineer your time horizon with how much you need to save and what rate of return you should expect (on average) to pursue your goals. Answers to these questions will determine the appropriate strategy to implement.

Once your strategy is invested, the key determining factor on whether you will pursue your desired goals is you. Your behavior, how you react to the next crisis and/or market correction, is everything.

Think Decades, Not Quarterly Reports

There is an abundance of strategies. In my opinion, it does not matter if you have the greatest strategy since sliced bread, if you capitulate and sell out when the going gets tough, you most likely have sealed your fate.

I’ve seen people with mediocre investment strategies pursue their goals by simply not reacting to fear or greed, but by following their plan with discipline, consistency and total faith that this too shall pass, and better days lay ahead.

In closing, your investment strategy should be viewed over a period of decades, not quarterly reports. Keep in mind you most likely lived through many crises during your lifetime. Most likely, we will experience many scary times, there will be several crises, market corrections, bear markets, recessions, inflation, tax issues, political problems both domestically and internationally.

Whenever these problems arise, the pundits on TV or social media will say, “it’s the end of the world” or “this time it’s different.”

Many investors will make the same mistakes and forgo their long term plans, selling out of their strategies of great companies at probably the worst possible time to sell. Why? Because it’s human nature. You wouldn’t be human if you didn’t feel that fear and hope that someone will come out and give the all-clear that it’s safe to re-enter the market.

The key is to not give in to that fear and have faith that throughout all these potential issues, companies will find a way to improve, innovate and create a new and better world. Along with that constant improvement, the valuations of these companies will increase as they have always done.

If you would like to take a closer look at what a financial strategy might look like for you and your family, we at Gold Family Wealth are here to help.


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About Michael

Michael Gold is the Founder and CEO, Wealth Advisor of Gold Family Wealth, an independent wealth management boutique and named one of the Top 100 People in Finance. Michael has 20 years of experience in the financial industry and has a bachelor’s degree in business and economics from the State University of New York College at Oneonta, an MBA from NYU Stern School of Business, specializing in Quantitative Finance and Leadership and his CERTIFIED FINANCIAL PLANNER™ (CFP®) credential. He serves business owners and entrepreneurs by stress-testing their financial plan to identify red flags and missed opportunities. Michael strategically outsources professionals from various fields, such as tax, insurance, retirement and trust and estate law to collaborate on potential solutions to help position his clients to pursue their desired goals.

Michael currently lives in Westport, CT. When he’s not working, you can find him spending time with his wife, Giselle, their three children, Sebastian, Aria, and Pierce, and their dog, Charly. To learn more about Michael, connect with him on LinkedIn.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Gold Family Wealth, LLC), or any non-investment related content made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Gold Family Wealth, LLC. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Gold Family Wealth, LLC is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Gold Family Wealth, LLC’s current written disclosure statement discussing our advisory services and fees is available upon request. If you are a Gold Family Wealth, LLC client, please remember to contact Gold Family Wealth, LLC, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services.

Investment advisory services offered through CWM, LLC, an SEC Registered Investment Advisor. Carson Partners, a division of CWM, LLC, is a nationwide partnership of advisors.

“Top 100 Magazine selections are made utilizing proprietary software, which employs an algorithm to search a variety of online resources for industry-specific terms and keywords. These resources include social media, blog posts, peer reviews, and Google indices. In addition, wealth managers must also meet the following criteria: 1. Registered with the SEC as a registered investment adviser or a registered investment adviser representative; 2. Not more than 1 filed complaint and never been convicted of a felony. Listing in this publication and/or award is not a guarantee of future investment success. This recognition should not be construed as an endorsement of the advisor by any client.”

A diversified portfolio does not assure a profit or protect against loss in a declining market.

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