A 5-Step Recipe for Investment Success in this (and any) Market

For long-term investing success and wealth accumulation, follow this time-tested and proven 5-step recipe.


  • Own High Quality Assets
  • Employ a Resilient, Time-Tested Investment Strategy
  • Be Tax-Efficient
  • Have a Rebalancing Plan (and stick to it)
  • Play the Long Game


  • Step 1: Own High Quality Assets. Start with broadly diversified no-load funds with low costs, minimal trading, and a strategy proven to work across time and markets.  Do not substitute average mutual funds! Probably 98% of mutual funds are not worth owning.  They are simply bad business deals.  They charge too much, trade too much, and as a result have poor performance and adverse tax consequences. This is particularly true of broker-sold funds (easily identified by their A, B, or C-class shares) that also often come with a large and unnecessary commission charge. 
  • Step 2: Employ a Resilient, Time-Tested Investment Strategy.  Mix in a globally diversified portfolio emphasizing value and small company stocks. There is compelling historical data to suggest this type of portfolio delivers the best results.  (For more on this topic click here.)   
  • Step 3: Be Tax-Efficient. Add a full helping of  tax-deductible contributions to IRAs and retirement plans. This means not only taking full advantage of any and all opportunities to make tax-deductible contributions to IRAs and workplace retirement plans, but also making sure the most tax-inefficient assets (e.g. high-yield bonds) are placed in retirement accounts where they will suffer no current-year taxation. . . and the most tax-efficient investments (e.g. individual stocks, municipal bonds) are housed in taxable accounts.
  • Step 4: Rebalance Periodically.  Consistently stir in a rebalancing plan to systematically “buy low and sell high.”  Emotionally, it’s easier to add to asset classes that have recently done well; in the long run, however, it is better to add to assets that have become cheap and reduce those that have become expensive.  Rebalancing will also help prevent over-exposure to any particular asset class.   
  • Step 5: Focus on the Long Term. Patiently watch your investments simmer. Don’t worry over market ups or downs this week or month. If you are investing today to build a retirement nest egg for years—or decades—to come, look at market downturns as as opportunities to add to investments when they are temporarily cheaper, not as reasons to sell.  Having a long-term focus does wonders for helping you rest easier today.

Would you like to try this recipe? Give us a call! 619-435-1701 or visit Our Portfolios to see our selection of portfolios that follow this recipe.

Photo: Liz West/flickr.com

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