Ideas on how to become rich: Financial Management - what the rich do in a down market, part 3

Ideas on how to become rich: Financial Management - what the rich do in a down market, part 3

SALLY KLAUS AND HER FINANCE IDEAS:

FINANCIAL MANAGEMENT: WHAT THE RICH DO IN A DOWN MARKET

Part 3

Welcome back. In this part of financial market survival strategy, we delve into the subject further. There are two strategies to win the battle for investment survival: (A) a long term investment focus (strategy) and (B) a short term investment focus (tactics). It is commonsense to use the current financial environment to keep the big picture of investment in focus.

A strategic focus means looking at long term financial assets because there are many investments which take a long time to come to pass. It is like playing chess with the final checkmate in mind ultimately for the opponent. You need to see the end before even starting the investment game.

Assets such as real estate, mutual funds or even insurance schemes are for strategic investment purposes, because these take a long term investment perspective. It is our investment journey’s final destination; where do we stop for a rest eventually?

Use tactical financial plans which are the moves like tactical chess – moving the pawns first, one at a time. It is like a traveler who has to pause at stops along the long journey. Short term assets are useful for shifts in any financial market movements or asset valuations. When it is deemed appropriate to do so, you should execute various tactical asset allocation shifts by moving financial assets in convenient parking lots for you to manipulate short term financial movements.

The key thing is to be prepared for investment changes and financial market movements as the world is very volatile these days with economic, political and financial changes taking place almost daily.

Another point to note is: do you know where you are going? Every one of us needs a road map to check our direction and also to ensure we are moving in the correct path. Are you more afraid of losing money or missing out on an opportunity? What is your investment personality, once again? This is not a simple question but one that needs to be successfully answered. To successfully establish a portfolio, you have to take some time to get to know yourself and your money making goals. You need to honestly evaluate your financial conditions and the kind of investment goals or money making personality you have.

Do you plan for your children’s education or do you plan for a resort style living after retirement? Each of us has ideas of what we want our money to do, and how to do it, and how money making is important or not so important for us, so if you are going to need money in two to three years’ time, then you must automatically rule out certain long term financial assets, as you probably have no time to wait for them to give you investment returns.

For teenagers, five to ten years may seem a long time to wait but for a working professional in his 30 or 40s, these sorts of years are not a long term thing. You have to deal with risk factors, tax factor and also the investment returns you are envisaging for the next few years. There are many factors to consider!

The key reminder is to ask yourself: do you have enough money for a rainy day?

End of third part of this “financial ideas” series

Special thanks to Sally Klaus and her contributions to my finance, investment and money blog. More to come here on this site on Ideas on How to Become Rich; stay with me. Thanks and cheers.


Ideas on how to become rich!