The Three Questions of Investment, That You Must Answer

Everyone wants advice on investing, but if they really want to be taken seriously by other investors, they need to have their investment goals defined. I’m having a record year (following my previous record year of last year), and it seems there is always that guy or girl who wants advice on where to put their money.

I’ll always have the same set of questions.

1. What are your goals?

“You want to get a return of 5%? How about 7%? 10%? Wait a sec, you want how much??? 100%?!

Ninety percent of the time, I realize whether or not you’re even worth talking to at this point. If someone has a goal of 10-15%, we can talk real strategy and assess your ability to handle risks and responsibilities, but anything much higher you gotta be ready to roll the dice. You want to earn 7% or less, I can definitely help you with that. Personally, I aim for 25% a year, but that is a very high goal and I feel I am able to obtain this goal because of how I answer the next two questions.

2. How much risk are you willing to take?

“I don’t want to lose anything

Then you aren’t ready for any real decision making or even for investment! Investment is about risk versus reward, without risk your return will be minimal to none. I personally am able to take a high risk. I also am able to take large hits emotionally. Yes I’ll have my -2.5% portfolio days (despite hedging), but I am able to objectively take a look at my positions after the hit and decide “Do I need to change anything (most of the time I don’t)?

3. How active do you want to be in decision making and managing your account?

“I’m not good managing my stocks or finances”
Then you are absolutely not ready to manage your investments via stock picking. If you absolutely cannot manage your investments, even emotionally, you should not be involved in investing. This is the time to consider a money manager, yes they are going to a fee, but you are literally not able to handle your investing. Although I personally find it sad you can’t find your stride with actively managing your accounts, I wouldn’t recommend you try. I watch my account every single day. Do I need to? No, but once every few weeks would be the minimum. If you are relatively comfortable managing but don’t want to get crazy, there are strategies (such as cover call writing) that require minimal management. You have to assess how involved you want to be and can be.


These are the the three questions you need to answer BEFORE really having an investment strategy and approach. Be honest with yourself and if in doubt, be conservative about any gray area (risk, emotions, etc.).



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