Published on 4/25/2022
Investing Strategy Basics
If you have the time and the expertise to Day Trade, then knock yourself out. But the other 99% of us need a strategy that works, that will not hurt our brains, or take time away from our families, jobs, and other joys and responsibilities. Long-term investing (LTI) is the way to go for the everyday investor, but what does LTI mean?
Well, let us try and wrap our heads around the concept and all of its nuances. Hopefully after this short article you will have gained some confidence and knowledge on what it takes to be a successful LTI investor.
First and most importantly, let us define our terms/concepts…
Dollar Cost Average (DCA) – DCA investing is the most practical form of investing for the everyday person. It is essentially what your employer provided retirement account is doing when you contribute every month. With a DCA plan you just buy into the market little by little every month/week/quarter and this way you avoid the impossible task of trying to time the market and just get the overall “fair” price of a particular asset.
Diversification – To diversify your investment portfolio means to hold a variety of different assets across multiple industries. C3 and others generally recommend holding at least 25 different assets and this should be spread out between stocks, ETFs, Precious Metals, Bonds, Cryptos, and other alternative Investments. Also, just because you invest in 25 different stocks does not mean you are well diversified. If all 25 stocks are in the Tech industry, then you are setting yourself up in a high-risk/high-reward position. You should have assets that are in the tech industry, the consumer goods industry, the energy sector, and all other classifications (Or as many as possible).
Long-Term Investing – Generally speaking long-term investing is holding assets for at least five years. But this is an opinion that differs among different groups and experts. C3 usually likes to think in terms of 10-year increments when it comes to investing.
Reallocate – Reallocating your investment portfolio is particularly important but should only be done when necessary or if it is built into your portfolio. If it is built into your portfolio, then you are probably a more advanced trader, and this post is probably not providing you with any new information. Reallocating should only be done in extreme circumstances like an asset going bankrupt, a new asset entering the market or a new alternative asset you want to diversify into becomes available.
Invest in your own Knowledge – Do not invest in something that you do not understand at a general level. This is one of a few Golden Rules when it comes to investing. The emergence of digital currencies and NFT’s have displayed why this is a Golden Rule more times than we can count over the past few years. If you don’t know what it is, and you can’t be bothered to gain an understanding of what it is then you should not put your financial future in it!! So many people blindly invested into Crypto’s and NFT’s over the past few years and lost so much capital because they did not understand the space.
Lump-Sum Investing – exactly what is sounds like. Say, you want to invest, and you got a few thousand dollars in the bank, lump-sum investing means you put it all into the market at once. This method is favorable to the DCA method because if you plan on holding for the long-term, then the price now is historically better than the price later and trying to time the market is a fool’s errand. However, most people usually do not have a lump-sum they can invest so the next best thing is the DCA method.
Now that we have terms defined let’s talk process.
Step 1: Pick your method of DCA or Lump-Sum investing or a combination of both.
Step 2: Make a list of the type of assets/industries you have available to you. Obviously, you could just look up a list but making the list from your own brain will help you understand what you know and what you do not, which will come in handy in step 3.
Step 3: Find out if any of the assets/industries on your list fall out of your scope of knowledge
Step 4: Decide if you want to educate yourself on those assets/industries that you do not have firm grasp upon. Take out the assets/industries you do not have a general grasp on and are not willing to learn about.
Step 5: Start putting percentages to the various assets and industries. Make sure you are never over exposed to one particular asset or industry. A good rule of thumb is to make sure that no one asset makes up more than 5% of your portfolio and no one industry makes up more than 10% of your portfolio. You can duplicate the breakdown of the S&P 500 or some other major index if you do not have knowledge or feelings that lead you to go slightly heavier on one industry over another.
Step 6: Start investing into the assets you have defined based on the percentages you allocated in step 5. We know allocating the percentages is the hardest part but if you stick to a well-diversified portfolio and do not over allocate to any one industry or asset then you should be fine in the long-term. It helps to keep speculative asset exposure low and blue-chip asset exposure high. Think Bitcoin over Dogecoin and Tesla over some small EV rival.
Asset Allocation will vary depending on stage of life and financial situation, so it is best to take a personalized approach. A good article on asset allocation can be found HERE.
Step 7: Monitor your portfolio on a regular basis but refrain from looking at it everyday unless you are an active day trader. C3 suggests looking at your personal portfolio at least once a month but only if you have the will power and the ability to stomach short-term volatility. Time heals all wounds and everything from Global Pandemics to Wars to Housing Bubbles do recover over the long-term (Or so history says).
So, the basics are deciding between the DCA method and the LTI method or some combination of them both depending on your own personal financial situation. Then figuring out what assets you are going to invest in. C3 can help with the moral side of things when you are trying to decide between assets but picking assets that have financial potential is a whole other story. Some like to just stick with the major ETF’s (C3 dislikes major ETFs because of the nefarious players), others like to enlist the help of a certified financial planner, and others still will like to do their own due diligence and pick assets they feel strongly about. C3 encourages the latter option because passive investing almost always equals secular investing. To be a Christian investor you must do your homework. I know we all despise the H word, but homework is a necessity of life, especially the moral Christian life.
How C3 Can Help!!
The C3 Mock Portfolio is a good starting point for those who want to learn more about diversification or what assets to pick. Also, the Bi-Weekly Curation Report on timely assets that C3 does can be a hugely helpful tool when deciding between what assets should or could be added to your portfolio.
We suggest compiling our own list of assets/industries before looking at the one below so you can gauge your own understanding of the investment world. But the below list should help put things in layman’s terms. Note that the below mentioned companies or assets are not investment recommendations, they are just listed to help you identify the industry being listed.
- Energy (Coal/Natural Gas & Green Energy)
- Big Tech (Microsoft, Google…etc…)
- Social Platforms
- Consumer Goods (Gas & Food)
- Clothing/Retail (Walmart. Amazon, Etsy)
- Raw Materials/Construction/Mining (Steel, Iron, Lithium, Equipment)
- Vehicles (EV and Regular)
- Transportation (Air, Rideshare, Train, Public)
- Healthcare (Hospitals, Pharmaceuticals, Equipment)
- Mutual Funds
- Real Estate (Stocks/ETFs or Alternative)
- Precious Metals (Stocks/ETFs or Alternative)
- Cryptocurrency (Stocks/ETFs or Alternative)
- Fine Art
- Fine Wine
- Debt Investing (be careful not to dip into usurious practices)
- NFT’s (C3 is not a fan but it is a class that needs to be listed)
- Local/Personal Businesses (The most risky but also the most moral form of investing)
Investing for yourself and managing your own portfolio can be tricky and scary, but C3 does believes it to be a moral good. Being the steward of your own capital and making sure it is not being used for nefarious purposes we believe is a great way to build up riches in Heaven and isn’t that what it is all about?!?!
We know this short article could not possibly answer all your questions on investing strategies, so please feel free to send us an email at firstname.lastname@example.org. We would love to hear from you and answer any questions we can! As always, please spend time in prayer with our Lord Jesus Christ and speak with friends and family before making any major financial decisions.