7 Steps to Build a Custom Investment Strategy

June 4, 2024
Britt and Laurie-Anne two women laughing and looking at their computers on a couch in a well-styled living room
Britt & Laurie Anne
Two female investors in their 30s with a collective net wealth of over $6 million+
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Does investing intimidate or confuse you? If so, you’re not alone. In fact, we did a survey and more than 65% of women said that their main roadblock to investing was that it’s confusing.

And it makes sense. In high school, you spend a lot of time learning how to calculate the length of triangle sides, but likely no one ever taught you how to make money in the stock market.

So, let me simplify a few things.

Today, I’m going to give you seven steps to develop an investment strategy tailored to your lifestyle and needs.

How to Create an Investment Strategy

1. Set your financial goals

Start by clearly defining your short-term and long-term financial goals. These may include saving for retirement, buying a home, funding education expenses, or building wealth. 

Make sure your goals are specific, measurable, achievable, relevant, and time-bound (SMART).

  • Specific: be clear on what you want to accomplish and how you’re going to accomplish it. For instance, instead of, “I’m going to work on my finances,” say, “Every Wednesday morning, I’m going to make a cup of coffee, sit down on the back porch, and spend an hour reviewing my spending habits, looking at my bank accounts, and tracking my financial habits and progress.”
  • Measurable: set a number so you can determine whether you hit the goal or not (for example, “I want to raise my credit score by 50 points” or “I want to increase my savings by 25%”)
  • Attainable: make sure you have the necessary skills and resources to accomplish this goal
  • Relevant: a relevant goal can answer “yes” to the following questions:
    • Does this seem worthwhile?
    • Is this the right time?
    • Does this align with my other values and other goals?
  • Time-bound: set a deadline. This could be something like, building up $1,000 in your emergency fund in two months. For big goals, like paying off student loans, you may want to aim for five years from now, or whatever is reasonable based on your debt and income.

2. Assess your risk tolerance

Determine how much risk you're willing to take with your investments. Consider factors such as: 

  • your age (more specifically, how close are you to retirement?)
  • investment timeline (how long do you have to invest? If you’re planning to retire in 5-10 years, then your money doesn’t have as much time to grow. However, keep in mind that you don’t take all your money out the day you retire, so some of your investments will continue to grow for years afterward)
  • financial obligations (Do you have kids you’re supporting? Are you paying off a mortgage or car loans?)
  • income stability 
  • comfort level with market fluctuations (If there’s a drastic dip in the market, are you willing to wait for it to rise again?)

Understanding your risk tolerance will help you choose investments that align with your comfort level.

3. Understand different asset classes

Familiarize yourself with various asset classes, such as stocks, bonds, real estate, and cash equivalents. Each asset class has different risk and return characteristics, and building a diversified portfolio across multiple asset classes can help manage risk and optimize returns.

To give you a quick overview of some of the most common asset classes:

  • Stocks: these tend to be high-risk, since companies can go under, but also high-return – typically between 8-10%
  • Bonds: these are often low-risk, since you’re practically guaranteed to get your money back, but it’s also usually lower return than, say, stocks
  • Real estate: Real estate investments involve owning physical properties or investing in real estate-related securities. Direct real estate investments may include residential properties, commercial properties, or land. You could also invest in real estate investment trusts (REITs), which are publicly traded companies that own and manage income-producing real estate assets, offering investors exposure to the real estate market with liquidity similar to stocks.

4. Allocate your assets

Decide how to allocate your investment capital across different asset classes based on your financial goals and risk tolerance. This is known as asset allocation. 

Consider your investment horizon, liquidity needs, and market conditions when determining the appropriate mix of stocks, bonds, and other assets.

If you don’t want the responsibility of deciding asset allocation yourself, a target date fund will take care of that for you. All you have to do is input the year you want to retire, and it will automatically allocate your investments to be the ideal level of risk.

5. Consider tax implications

Be mindful of the tax implications of your investment decisions. Understand how different types of investments are taxed, and consider strategies to minimize taxes, such as investing in tax-advantaged accounts like IRAs or 401(k)s.

You can even leverage Health Savings Accounts (HSAs) for tax-advantaged investments.

6. Decide how much to contribute

If you don’t have any investments, decide how much you’re willing to initially invest. Remember, even if an investment is highly liquid, you want to give your money time to grow, so only invest as much as you’re willing to live without.

After you’ve made your initial investment, it’s time to think about how much you want to invest and how frequently you want to contribute moving forward.

One popular strategy is called dollar cost averaging.

Dollar cost averaging is an investment strategy that involves consistently investing a fixed amount of money at regular intervals, typically monthly or quarterly, regardless of the current market price. 

Basically, you decide on a fixed amount of money that you’re going to invest at a pre-established regular interval. For example, maybe you decide you’re going to invest $500 every month.

This is a great long-term investment strategy, like saving for retirement or building wealth over time.

7. Review and adjust your portfolio

Periodically review your investment strategy to ensure it remains aligned with your financial goals and risk tolerance. Make adjustments as needed based on changes in your life. 

For instance, if you get a pay raise or pay off debt, you may want to increase how much you’re investing. Or as you approach retirement, you may want to move to  more low-risk investments.

Final Thoughts

Hopefully, this helped make investing a little less confusing.

If you want to learn more about how to grow your money through investing, be sure to check out our free investing masterclass! Our Dow Janes co-founder Britt will talk about how she lost $10,000 on her first investments and how you can avoid making the same mistakes. You’ll also learn our proven strategy for investing and how to break through the obstacles that stop most women from investing.

Hope to see you there!

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