Build Your Wealth: A Seven Day Plan
This short seven-day guide covers goal setting, allocations, budgeting, diversification, monitoring, risk, and rebalancing.
Day 1: Setting Goals For Your Investments
Without a clear target, it’s hard to know what we’re aiming for.
Here are a few examples of goals we could set:
“I want to beat the S&P 500 by 1% this year!”
“I want to pay off my house in five years!”
“I want to save for my child’s college in 15 years!”
Now that we have our goals, we can figure out how to invest and how much we need to save each month to reach them.
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Day 2: Allocate Your Investments
It’s great to think about balancing your investments.
By diversifying your portfolio, you can take advantage of different growth opportunities while managing risk.
Consider allocating your investments in a way that feels right for you, such as:
10% in cash or money market
50% in conservative investments
25% in moderate ones
15% in aggressive investments
Remember, these choices can be adjusted based on your risk appetite and age.
You might also find it helpful to decide how much you want a financial advisor to handle and how much you’d like to explore with your own investment strategies, such as:
90% managed by a financial advisor
10% self managed
Now that we have our allocations, we can invest our money accordingly.
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Day 3: Paying Yourself
You’re on the right track with your goals and have clearly identified how you want to invest.
Today’s exciting objective is to pay yourself!
Every paycheck or month, take a step towards your financial future by setting aside some of your income for:
401(k), IRA and Roth IRA contributions
transferring money to the account managed by your financial advisor
investing in a self-directed brokerage
exploring cryptocurrencies
or doing all of the above.
Make sure to include each of these investments in your budget.
If you haven’t created a budget yet, today is the perfect day to start.
You might discover that you need to adjust your spending to reach your investment goals.
For example, consider cutting back on dining to save more and move closer to achieving your dreams.
This way, you’ll be paying yourself more and enjoying the fruits of your labor sooner!
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Day 4: Selecting Your Investments
Congratulations on taking the first steps towards building your investment portfolio!
With money flowing into your accounts, you’ve already made a great decision by allocating funds to different types of investments.
Now, it’s exciting to choose the specific investments that align with your goals.
Whether you:
use an investment screening tool
seek guidance from your financial advisor
consider low-fee mutual funds or ETFs,
or even exploring Bitcoin while learning about cryptocurrencies
each option offers unique opportunities.
Remember, periodic evaluation of your investments is key to success.
Stay focused on your goals and risk appetite, and make adjustments as needed.
You’re on the path to achieving financial growth and stability!
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Day 5: Keeping Your Eye On Your Investments
How often to you want to check and evaluate your portfolio?
Do you want to do it:
every day?
once a week?
quarterly?
or annually?
All approaches can be successful, and it’s exciting to find the one that suits your personality and investment style.
For crypto and brokerage accounts, which are more dynamic, checking them daily or weekly can be a rewarding way to stay engaged and make timely decisions.
Meanwhile, reviewing long-term investments like your 401k or IRA once a quarter or yearly is a great way to ensure they continue to align with your future aspirations.
Remember, your strategy is unique, and sticking to it can lead to significant rewards.
Trust your plan and avoid making impulsive decisions based on market rumors.
You’ve got this!
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Day 6: Balancing Risk
Investing aims to grow wealth, not lose it.
Many investors focus solely on the upside, neglecting the downside.
Every investment involves risk, and not every trade will yield a profit.
What works today may not tomorrow.
External events like wars or monetary policy changes can significantly impact the stock market.
The crucial question is how much we’re willing to risk.
A typical bear market can lead to losses exceeding 20% for indices and 50% to 80% for high-beta stocks like tech stocks.
Will you panic and sell at the first signs of a bear market, or will you hold on and hope for recovery?
While indices tend to recover, some individual stocks never bounce back after a bear market.
If you decide to sell, setting a maximum loss before doing so can mitigate the impact on your portfolio.
For instance, to recover from a 1% loss, we need a 1% gain, while to offset a 50% loss, we require a 100% gain.
Another perspective is that you lose $1 in nine trades but make a $10 gain in the tenth, resulting in an overall gain of $1.
Conversely, if you lose $2 in nine trades but make a $10 gain in the tenth, you’ll be down $8 overall.
To reduce risk and grow our wealth, let’s adopt a more balanced approach.
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Day 7: Rebalancing
Our investments can sometimes get out of balance, but this presents an opportunity to make positive adjustments.
When the market is thriving, it’s natural to feel excited about our successes.
However, during downturns, having too much in one area can increase our vulnerability.
For instance, if you initially invested 25% in the tech sector and it grew to 50%, you can sell half to restore balance.
This not only helps you realize gains but also ensures your portfolio aligns with the growth rate and risk level you originally desired.
Plus, there’s a great sense of accomplishment in selling and securing profits.
Before You Go
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Disclaimer: The author of this post is not a financial advisor. The information provided herein is not financial advice and should not be construed as such. This content is intended solely for educational purposes and should not be used as a basis for any financial decision-making. Investing involves risk, including the potential loss of your invested capital. Only invest what you are willing and able to lose.