Many people think developing an Investment Philosophy is something only rich people need to do, but even children can benefit from an investment philosophy to practice making values-based decisions.
Alexandria Blaelock, author of Ms Blaelock’s Book of Holistic Personal Finance argues “You don’t have to freak out about developing an Investment Philosophy; it’s just an extension of your spending and savings policies – there are some lines you just won’t cross.”
Here are Blaelock’s tips for developing an investment philosophy:
- Start with your values: Investing money is essentially lending it to other people to grow their businesses. If you are anti-war, you probably don’t want to invest in munitions. And for good measure, avoid banks and investment products that assist them too. If you are environmentally focused, choose companies developing sustainable solutions,
- Consider your service providers: We all need banks, insurance companies, utility suppliers, medical treatments, manufactured goods and so on. Whether you invest or not, your purchasing decisions give them your money. A company that values its customers will work ethically, so investigate how they operate. Do they respect their workers and the countries they operate in? Do they obey the law and pay their taxes?
- Take a long-term view: As well as considering your returns over the next few decades, consider the impact of your purchases and investments on future generations. Look for companies that aren’t operating as if there is no tomorrow.
- Choose your strategy: At different times in your life, you will choose income (low risk) or growth (high risk) strategies. You might choose growth as a youngster with time on your side, and income as you approach retirement. More likely you will have a combination of both to spread the risk.
- Review annually: It doesn’t matter how old you are, a lot can happen in a year. Commit to reviewing your philosophy and strategy at least every year so that you can make adjustments before it’s too late.
Alexandria’s tips on developing an investment philosophy will help you make a difference in the world, maybe even help usher in a bold new universe.
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