The Four Keys to Achieving Your Financial Goals

Marc Lichtenfeld
by Marc Lichtenfeld, Chief Income Strategist, The Oxford Club

Despite the fact that the S&P 500 has doubled since the financial crisis in 2009, a shocking number of people still seem turned off by the stock market.

According to a poll conducted by Prudential, 58% of respondents “have lost faith” in the stock market. Even more stunning, 44% say they will NEVER invest in the stock market again. Never ever!

What that tells me is there’s still a lot of buying power on the sidelines. Call me a cynic, but people often say one thing and do another.

I’m sure there are some investors who got so burned by the collapse in 2008 and 2009, that they really never will put another penny into the market. They’ll cower in fear, with all of their money in gold or bury their cash under the floorboards. And while that might keep their money secure, it’ll never produce wealth.

If you’re a long-time reader of the site or subscribe to Investment U Daily, you know that we don’t try to time the markets. That’s a fool’s game. Sure, a market timer might make a great call now and then, but I don’t know any who are consistently accurate.

So rather than the futile exercise of trying to figure out the exact moment to buy or sell stocks, stick to our “Four Pillars of Wealth” to achieve your financial goals. The results will be better and you’ll be able to sleep at night.

  1. Stick to an Asset Allocation ModelInvestment U follows a formula that won Dr. Harold Markowitz the Nobel Prize in finance in 1990.
  2. Adhere to Safety Switch – Buying a stock is easy. Knowing when to sell is the hard part. This way we let our winners ride and cut our losses before they get too big.
  3. Understand Position Sizing – Invest no more than four percent of your portfolio in any one stock. That way if things go wrong, no one particular holding will sink your entire portfolio.
  4. Cut your Expenses (Including Taxes) – Invest in no load funds with low expense ratios like Vanguard index funds. Also, choose closed-end funds that trade at a discount instead of open-end mutual funds with up-front fees or loads.

You can potentially lower your taxes by not selling your gains for one year, so that they qualify for the long-term capital gains tax rate (rather than the higher short term), avoid actively managed funds in your taxable accounts and keep your high-yield investments in your IRAs or other tax-deferred accounts.

The markets are a little tough right now. The big financials, such as Morgan Stanley (NYSE: MS), were just got downgraded by Moody’s. Typically, it’s difficult for the markets to rally without the help of the financials.

Several other sectors such as networking, transportation and utilities are also weak. One that still looks strong is the drug and biotech sector.

The point is there’s still stocks out there performing well. You just have to look harder for them.

Consider following the Four Pillars of Wealth to achieve your financial goals and leave the panicking to those who have ridiculously sworn off the markets forever.

Good Investing,

Marc Lichtenfeld

Editor’s Note: These “Four Pillars of Wealth” were originally developed by Alexander Green for The Oxford Club. Marc and Alex wanted me to share a more detailed outline of these wealth preservation tips for those interested in learning more.

For a free copy of The Oxford Club’s full report on “The Four Pillars of Wealth,” click here.

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