Knowing how to secure your financial well-being is one of the most important things you'll ever need in life. You gain control over your daily finances and the ability to make choices based on what you want and need. The purpose of "Smart Investing" is to focus on the mechanics and principles of investing one's money. To end up where you want to be, an investor needs a road-map, a financial plan. "Smart Investing" starts with the process of setting goals and getting acquainted with your financial position, i.e. what is your net worth and how do you make and spend money. This will help to organize your thoughts and focus on the important matters in your financial life. The next and very important step is assessing one's risk tolerance. This is one of the most critical aspects of investing. It will guide the whole process and if done properly, it will let you sleep at night and maintain your investing resolve through the good and bad times. Next, the components of the investing world are explained, including the products: stock, bonds, mutual funds, etc.; and the players: brokers, financial professionals and rating agencies. Also, a brief review of the dynamics of the world we live in is presented, i.e. the economics of the business cycle. Continuing with the process of building a plan, one's asset allocation to risk assets and fixed income is assessed and determined based on individual risk tolerance and time horizon. Then this basic asset allocation is diversified into sub-asset classes for the purpose of mitigating risk. We learn how asset classes are correlated and how this relationship has affected them over time and through major crises. Putting it all together, model portfolios of mutual funds and exchange traded funds (ETF's) are presented as an examples of how to build a diversified portfolio with less than ten funds. As a final step an investment policy is written for one's individual situation that is the road-map or guidelines for investing. It will include the chosen risk tolerance, investment strategy, asset allocation ranges, investment choices, asset quality requirements and one's current target asset allocations. "Smart Investing's" objective is to prepare a potential investor to understand the processes necessary to select appropriate investment vehicles and in the right quantities for their unique situation and to be ready to invest money - essentially a do-it-yourself guidebook to investing.
About the Author: Ray Gazelle is a Certified Financial Planner(TM) professional. He is a fee only planner in private practice. Prior to starting his financial planning practice, he enjoyed a career in banking for over 33 years with a large Mid-Atlantic bank. He is active in his community and has offered his services over the years to non-profit organizations as board trustee also serving on their finance committees.