6 Ways To Develop An Investing Style

To master anything, we need to harness the power of focus. From studying investing and practicing it for about 20 years, I came to realize that there are many ways to develop a successful investing path, focus and ultimately a style. The good news is that there are multiple ways and there does not need to be a one size fits all approach. Just like in fashion and art, there are many ways to express ourselves that can ultimately be effective. In addition, there are dozens of great examples for us to study and achieve success as investors. The bad news is that there are so many options and paths that it can be confusing, which typically leads to inaction, paralyzation or chasing the next hot thing. Therefore, how do we develop our own unique investment strategy? What can we learn from other successful investors?

A Simple Approach

Most people are not that interested in investing. As someone who enjoys it, I can also see others perspective. Most people want to live their life, eat good food, be around fun people, get their work done, watch a fun show, raise their kids and go on vacation, etc. The idea of understanding the difference between an ETF, bond or mutual fund is just plain boring. I understand! For these folks, I would advocate for a very simple strategy and investing life. Basically, have money automatically withdrawn from the bi-weekly paycheck, get the company match and place in a balanced portfolio of low cost index funds with some bond funds. Let it ride and forget about it. Therefore, this person can wake up someday in 30 years of living their life and find a nice healthy nest egg that can help fund their life into the second half of their years in this form on planet Earth. The bottomline for most folks is that they should practice the 7 Ways To Build A Robot Wealth Building Army!

Unique interests

But for some this is not enough. They may do the above through an employer, but perhaps they want to accelerate their path to FIRE? Perhaps they have particular interests or other investing paths they want to explore? Or perhaps they want to feel more active in their investing activities. Here are several profiles and paths to develop an investing focus and style:

1. A Mission Statement and Goal

I like the idea of an investing mission statement and setting some kind of goal. It does not mean that these will not change over time. But a clear mission statement can set the stage for success in many areas of life. It provides a guiding light and north start to set course towards. Here is an example:
Achieve financial independence by building enough wealth that I can live off the interest income. Support my family, send my children to college and enjoy the occasional family travel experiences. Live in a modest home in a safe neighborhood.
The next step would be to start attaching numbers to this mission. For example, let’s say it would require $1.5 million in assets to achieve this mission. However, this can fluctuate over time, but it is a good idea to put a number out there and work to it. I have enjoyed setting more immediate micro goals over the years since it takes a long time to achieve the big goals. For example, when I was first starting it was helpful to set $100k in investments as the initial goal. And with automated savings/investing, reinvesting dividends and a stock market tail wind, that goal came around faster than expected.

2. Know Yourself Through Experimentation

It is only through dabbling and experimenting that we determine what we enjoy, have passion for and perhaps a natural affinity for. A great example is Jerry and I. Jerry has developed an amazing ability to trade options. He continually learns and refines his approach. He has a passion for this kind of investing and you can learn a lot about it through The Money Vikings blog. Here are some of his great posts on options trading for beginners: Stocks vs. Options Options Basics Jerry’s Trading Journal I on the other hand do not have the natural knack for this that Jerry has. I like it, I am dabbling, but it will probably not be my main focus of investing. I have developed over the years a personal investing interest and passion for real estate. There are many things to like about real estate beyond the usual. The physical nature of it and the ability to build communities of people. Certainly, I like getting my hands dirty sometimes. I like that it provides a person a safe and comfortable place to live. Because of this I have focused a lot of time and energy into my real estate investing. Real Estate Investing – A Comprehensive Overview I am not some mega landlord or anything and in many ways am always learning. But my passion for it has not waned, therefore I continue to find ways to invest in real estate, whether it be physical properties, REIT’s, crowdfunding, etc.

3. Set a Foundation

It is probably not a great idea to dive into risky stock picking or Options trades as a first move. Better to get acquainted with investing through a simple foundational plan. For me this is the employer 401k/TSP plan with the employer match. This money is automatically removed from the paycheck and placed into an investment fund. Many folks utilize Vanguard or similar low cost firms to access investment vehicles. SEE RELATED: Vanguard Investing 101

4. Test The Waters (Dividends, Options, REIT’s, Bonds, businesses…)

After you begin to know what is available to you in terms of investment vehicles, it might be time to try out a few. Every so often I test the waters on a new approach. For example crowd sourced real estate investing through Fundrise. Keep in mind there are many different ways and asset classes to consider in your investing life: REIT’s, ETF’s, stocks, mutual funds, 401ks, TSP, real estate, crowdfunding, options trading, etc. Within each one of these are many decisions in terms of focus and exposure. Then after you hone in on an asset class you enjoy or understand, you may want to specialize even further. For example, check out options. One may want to specialize in Iron Condors.

5. Refine and Focus

“Know Thyself”

This quote was said to be inscribed at the entrance to the Temple of Apollo in Ancient Greece. This saying was also reported to have been inscribed in even older temples in Ancient Egypt. To me this quote carries a lot of meaning. On one level, it may have been reminding people to try and understand their true nature, or the nature of this human existence. Ok, a little too deep for a personal finance blog. Another way to interpret this is to consider knowing what your particular strengths and passions are, and then attempting to capitalize on them in terms of investing strategy. Some folks are very handy and can build anything, like my brother. They take the time to learn such a skill and have an inherent desire to do so. A person like this has many options in terms of fixing up real estate, making furniture or selling unique items on Etsy. Other folks have a passion for numbers. Understanding interest, ROI, time value of money can go a long way in finding an investing focus. As time goes on you may learn your particular investing style and strengths. As mentioned, Jerry has a particular interest and gift for Options trading. He enjoys the charts, probabilities, making efficient use of capital, etc. The point is to know thyself and harness those inner passions and strengths.

6. Risk Tolerance

Another huge factor to consider is your tolerance for risk. This will drive much of your investing style as time goes on. Some people can stomach huge swings in the market each day, week, month, etc. Others don’t mind collecting smaller returns for a slow and steady approach over the years. The important thing is to know yourself and what you want to handle and manage.  
  • As always, this is not investment advice for any individual and is written for informational purposes only. Investing is risky by nature. See a fiduciary financial professional.

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