Picking up from my last post, todays focus is the last activity leading to the selection and purchase of your investment.  The framework for the decision is based on your investment objectives and the associated investment types.

Choosing the Investment

When gambling, even if using a system like counting cards, ultimately the results are largely driven by luck.  That is something you cannot control.

Investing should be based on research and analysis leading to an informed decision that has nothing to do with luck.  Investing without analysis is very much like gambling.

That is not to say unknown factors do not exist (i.e., the equivalent of luck either good or bad) that ultimately will impact the result. However,  the majority of the factors are not subject to chance.

They are within your control.

Short list the candidates

Using your investment objectives and style as a guideline, determine the asset categories that are most aligned with your point in time needs. (e.g. income equities) .  From this point you need to start to gather a potential list of investments from the category and then start to investigate.

What do you investigate

Focus on determining the following:

• how well the investment maps to your objective (value, risk, etc)
• a full and clear understanding of what you are buying.  (That is a personal knowledge of why this investment will meet expectations)
• the level of risk associated with this investment (this needs to map to your objectives and style)

Complete your selection, make your purchase and move to step 2 in the ongoing cycle – ongoing management.  More tommorow.