Building an Investment Strategy: 4 simple steps to get you started

Joe Bradford

| 02/13/2016

Building an Investment Strategy: 4 simple steps to get you started

Each one of us dreams of being wealthy, having a nest egg, and being secure for the rest of our lives. One way to build that wealth is to invest. Remember, dreams are good, but preparation is better. The journey of a thousand miles starts with a few steps, so if you want to start on the path to financial security, you’ll need a plan. When building an investment strategy, keep these five things in mind:

1 – Have a purpose:

We’ve spoken elsewhere about this: In order to be a successful investor, you need a purpose. Not a goal, a purpose. Understand what you want to achieve, then build milestones and goals that move you towards that purpose. Saying ‘I need 20k for a mortgage down payment’ is different than saying ‘I need to purchase a home.’ Likewise, saying ‘I want 50k in my IRA’ is different than ‘I want security for retirement.’

Once you have a purpose (security for retirement) then you build goals for that (Save X amount yearly for Y number of years), and break those goals down into milestones (save X amount monthly for the year).

2- Keep It Simple:

Remember: the best system you can have if you are not going to be researching the company you invest in is to keep it simple. Choose a managed or index account, one with great reporting and excellent management review. Next, setup your monthly milestone to be deposited automatically. If you said you want to save 2400 a year, then you’ll auto-deduct $200 from your paycheck or account monthly.

3- Choose a Firm:

If you are going to be investing, this choice will rely heavily on whether you are investing long term or short term. If you are investing long term, and are a salaried employee, you probably have a 401k option through your employer. This makes everything easier for you. You still need to make sure that the 401k plan you use has low fees (many 401k plans eat up earnings through fees). If you don’t have a 401k option or maybe you are self-employed, you’ll want to look into an IRA, Roth IRA, or a SEPA-IRA. Whoever handles any of these accounts, make sure that have high-quality, low-expense offerings. Don’t have enough money to invest? Ask if you set up automatic deductions if the company will waive a minimum deposit. If they don’t, open a savings account and stash your cash, until the time that you have enough to open an investment account. Thing is, keep your hands off that cash. If it is in your checking account it easier to spend and easier to blow through without ever realizing it.

4- Maintain your plan:

Plans that are automated don’t really need too much attention, but you should check in on your investments at least once a year and probably better to do so every six months. Remember, there will be losses during that period, so don’t freak out about losses, but do speak to your fund manager about performance in the long term, what their projections are, and if you are taking the simplest approach possible. Remember, keep the login information, account information, and contact numbers for your investment plans on file, so that when you do need to check on things it’s not a hassle.

These four points aren’t comprehensive. There is a lot more involved with each of these steps, but to get yourself started keep these in mind. These are those first few steps you need to take for financial success through investing.

Next time we’ll discuss some of the things you should consider when choosing stocks and funds to keep them Shariah compliant.

For more in this series, click below:

  • Building an Investment Strategy: 4 simple steps to get you started (this article)
  • The Anatomy of a stock
  • Passive Vs. Active Investing (forthcoming)
  • Index Funds: The Basics (forthcoming)
  • How to deal with Impermissible Earnings (forthcoming)


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