There is an old saying that is as true now as it has ever been, “people don’t plan to fail, they fail to plan.” If you have decided to pay yourself (save) every month as you pay your monthly bills, here is what we think you should do next.

Diversify, Diversify, Diversify

You should not have more than 10% of overall financial assets in one stock, bond, or industry group. You could make this 20% in the case of your company stock. We have all seen or heard about personal financial tragedies resulting from having too many “eggs in one basket.” You do not want to be the next one.

Make sure to diversify between bonds and stocks and amongst types of stocks. We believe no more than 50% of stock investments should be in a particular sector (such as large cap growth or mid cap value). We suggest that stock holdings should total less than two-thirds of a total financial portfolio. 

Collect the Rent

Make provision for current interest and dividend cash flow in your portfolio even if you have no plans to spend that cash. A worthwhile goal is to earn a current interest and dividend yield of 3.0% or more. We believe this is most prudent in today’s environment when the old saying “dividends make a difference” is more relevant than ever. A total return investment strategy combines good current returns with long-term growth potential. 

If you owned a four-family flat in a nice neighborhood, would you be happy if you did not see four rent checks coming in every month? Probably not. Look at financial investments the same way.

These concepts are not “get rich quick” ideas, but what we see to be guiding principles designed to help you become financially independent over time. The objective is to allow you to “do what you want, when you want.” Please contact us for a detailed analysis of your individual situation.