How to Develop a Sound Investment Strategy

Developing a Sound Investment Strategy

The word ‘investing’ can seem overwhelming; the terminology, the different strategies and of course the actual investment selection. But the truth of the matter is that ‘investing’ itself is not as scary as it sounds. In fact, if you have funds set aside in a savings account or you have been contributing to your retirement account then you are already taking the steps in the right direction! But will that money create the financial freedom for you and your family down the road?  

As advisors to medical professionals, we encourage our clients to look beyond the scope of basic savings when planning for their financial success. The three essential considerations when determining suitable investment options are: understanding your goals, having a time horizon and recognizing your tolerance for risk.  While it’s important to first establish an emergency fund and make maximum contributions to your retirement plan, the next crucial step is to have your money work for you – and this is where investing comes in.   

Set Your Goals

One of the first steps in successful investing is defining why it’s important to you – what are your goals? The theory behind goal-based investing is that by setting goals you’ll be more likely to save for (and attain) those goals.  Whether it be saving for a new car or thinking further out towards retirement, it’s important to highlight what this money will be used for and when it will be used.

Once you have determined your goals, you can start planning. During the planning process, you will want to uncover both the total cost of the investment and your initial funding amount, as well as how much you’ll be able to contribute over time.  Knowing these key factors ahead of time can increase the likelihood of achieving your goals.

How Much Can You Risk?

Another factor when choosing your investments is evaluating your sensitivity to risk. A simple way to do this is by asking yourself what you would do in the situation of a market correction. If your answer is to take your money and run, then chances are you are more risk adverse and you may want to consider more conservative options. As the saying goes, higher risk is associated with the possibility for higher returns – but of course this can also mean potential for greater loss.

Outlining your goals and a time frame will better help you determine a comfortable level of risk. If your goal is more short-term, you may not be willing to take on the same amount of risk as someone who has a longer time horizon. It’s important to understand that aggressive and conservative investment vehicles serve two different purposes: respectively, to seek higher returns and to preserve capital. 

Specializing in the financial planning needs of medical professionals, our goal at Spaugh Dameron Tenny is to help you make smart financial decisions that will ultimately help you achieve your goals. We firmly believe in the value our in-depth services can provide, as annual financial planning allows you the opportunity to formally review your goals, make any updates (if needed) and evaluate your progress along the way. Whether you are in residency, practice or retirement, we invite you to explore our services. Contact us today at (704)-557-9750 to learn more about how we can help you.

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Shanda Mahoney

Shanda Mahoney Investment Relationship Manager, Spaugh Dameron Tenny, LLC