Thursday, January 22, 2015

What Matters Most?

During this RRSP season, I am left to think about how I plan to be successful as an investor with a vision to become financially independent while I am still young enough to make the most out of it.

To figure out this plan, I have to make a fundamental decision about what is most important to me: do I care more about growth? or do I care more about security?  This decision has to be made with some regularity because life goes on, and my circumstances may change the way I view these two opposing values.  

It is critical though to decide which is more important because this decision will guide the way in which I invest.  If I choose growth, then that means that I must take on more risk and I need to have an aggressive schedule of continuing investment.  I will likely choose investment methods that skew my portfolio more toward equity positions in emerging markets and less towards bonds, GICs and lower interest producing, but safe investments.  If I decide that security is more important to me, my investment methods will likely lean more towards bonds or expensive stock in well established large organizations that produce a lower yield, but won't go away anytime soon.

Different things get in my way too.  In a growth scenario, I will likely need more cash to invest, where new cash doesn't make much difference in an investment for security scenario.

I measure the success of each strategy differently as well.  Growth strategy is measured by a high return on investment, while a security strategy is more focused on consistent portfolio size...some growth doesn't hurt, but it isn't failure if it stays flat.

Disclaimer: I'm not a professional investment advisor, but I get the basics.  This post is more about how to plan strategically within an organization.

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