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Once you have identified your motives for investing, put your finances in order, and created an investment plan, the next step you should take is developing a successful investment portfolio. In this section, you will use what you have already learned about goal setting, asset classes, and investing to begin building a successful investment portfolio. Before you can build a successful portfolio, you must first understand the “priority of money,” learn the phases of successful investing, and know how to use the investment process to build your portfolio.


Reinhold Niebuhr in the Serenity Prayer wrote: “God grant me the serenity to accept the things I cannot change; courage to change the things I can; and wisdom to know the difference” (Fred R. Shapiro, “Who Wrote the Serenity Prayer,” Yale Alumni Magazine (July/Aug. 2008).

When it comes to investing, there are six factors which control investment returns. Five of those factors are within your personal control, while only one is outside your control.
The five factors you control are:

  1. How much you save
  2. How long your investments grow
  3. Your mix of investments, i.e., your asset allocation
  4. How much you pay in expenses
  5. How much you pay in taxes
  6. The factor you do not control is:

  7. Your investment returns

If you want to do well on your investing, spend your time and efforts on the things you can control! Focus on:

• Saving money each week or month,
• Reducing your spending and sticking to your budget,
• Keeping your investments in the market at your risk level
• The math that controls returns
• Your asset allocation mix, compounding, and diversification
• Reducing fees, expenses and transactions costs
• Reducing taxes

Successful investors spend their time on those areas that are within their personal control. They minimize their time spent on areas outside their personal control. In the area of investment returns, some investors use passive management/indexing as an investment strategy to minimize risk or give some control over the area of investment returns.

Most novice investors spend their time on areas they cannot control, i.e. investment returns, and fail to be concerned over areas they can control, i.e., savings, asset allocation, time, and expenses.

When you have completed this section, you should be able to do the following:

  1. Understand and use the “priority of money.”
  2. Describe the phases of a successful investment portfolio.
  3. Explain the investment process and learn how to build your portfolio.


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