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Factors, questions and analysis to help you figure out how to allocate your money

May 20, 2014 by Cody Willard

Each and every investor and trader is different for a million different reasons.

Some people love to take big risks in hopes of big rewards. Others are strongly risk-averse and cringe at the thought of any, even temporary, material losses from trading and investing.

Some people are born into big money and have traded stocks before they’re even out of high school. Some people are born into even bigger money and have a trust fund with millions of dollars already invested in stocks in your name. Most investors and traders, on the other hand, have to work for at least half their lifetime before ever having enough savings to consider buying a stock.

Some of you are in careers that have huge upside and you’re already making more cash flow than you can spend each month. Meanwhile, some of you are in a career where you know exactly how much you’ll be making for most of the rest of your life and its not much more than you make right now.

Each of these plus a million other factors go into you making decisions about how and where and when and with whom you’re investing your money.

If you had never bought a stock in your life and found yourself with a chunk of money to invest right now, what would start with? Would you buy the stocks that you have in your portfolio right now? Would you put the money under a mattress? Would you chase yield, trying to get a couple annual percentage points of return?

It’s important to ask yourself these questions on occasion, to help make sure that you are keeping up with your money and your stock portfolio and are allocating both properly.

Last week, I talked about how I learned the importance of listing your portfolio positions in order of weighting and giving each of the positions a rating between 1 and 10. That’s a crucial and easy to use tool to help you maintain the balance in your portfolio, but it does little by way of helping you make sure you’re headed towards your long-term investing and trading goals.

Consider the bigger picture and your own long-term goals and reasons for investing and trading before you ever move a dime.

Here are a few other questions each and every investor should ask themselves.

What’s your income profile presently?
Do you consider yourself struggling or making more money than you’d ever need?
(1 = Feel like I’m barely getting by….5 = Feel like I’m printing money)

What’s your income growth potential?
Are you highly upwardly mobile or are you likely peaked out in your income already?
(1 = I’m already retired…5 = I have clear, huge upside)

How far along are you in your career?
Do you have fifty years left to work still or are you already retired?
(1 = Already Retired…5 = Fifty Years or More)

What’s your inheritance potential?
Will you need to worry about sending your kids to college, supporting your parents (or other family) or do you come from a lot of money?
(1 = Lots of long-term financial familial obligations…5 = Lots of “old” money in the family)

Want to be a good Revolution Investor? It won’t ever be as easy as just buying some great stocks and forgetting about them. You have to continually stay on top of each of your positions, of your portfolio itself as well as continually making sure that you’re on track for your longer-term goals while keeping your risk profile appropriate for you too. Like I said, it won’t be easy. But with a good playbook, consistent diligence and appropriate money allocation, you can do it.

Listen to this in podcast form here: https://soundcloud.com/cody-willard/cody-underground-episode-22

Subscribe to my podcasts on iTunes here: https://itunes.apple.com/us/podcast/codywillard/id863326890?mt=2

 

 

 

 

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Filed Under: Trading

Disclosure: At the time of publication, the firm in which Willard is a partner and/or Mr. Willard had positions in some of the stocks mentioned above although positions can change at any time and without notice.

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This does not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation of any security or cryptocurrency or token any other product or service by Cody Willard or any other third party. Furthermore, nothing in this is intended to provide tax, legal, or investment advice and nothing in this should be construed as a recommendation to buy, sell, or hold any investment or security or cryptocurrency or token or to engage in any investment strategy or transaction. You are solely responsible for determining whether any investment, investment strategy, security or related transaction is appropriate for you based on your personal investment objectives, financial circumstances and risk tolerance. You should consult your business advisor, attorney, or tax and accounting advisor regarding your specific business, legal or tax situation.

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