How to Invest in 2017: The One Strategy We’re Sticking With

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In my previous post about what I learned from trading and investing, I emphasized the importance of long-term investing to build wealth when investing in the stock market. Invest for the long-term. As someone who has investments in the stock market, and who personally enjoys trading, I’ve allocated my investments with long-term and short-term (trading) funds. My long-term strategy funds (retirement account, Roth IRA, and taxable investment account) make up about 95% of my investments. The remaining 5% is used for my enjoyment of trading and picking stocks. If you enjoy trading stocks, then I highly recommend splitting your funds with long-term and short-term investments as well.

When I was younger, I only focused on a trading account and had dreams of making it big with my trades. As I’ve mentioned, my trades didn’t end well, so I had to start all over again. I made that mistake a few more times before I really learned my lesson and solely focused on long-term investing. Once I got used to only focusing on my long-term investments, I tightened my budget so I could have some trading money to play with to fulfill my trading desires. The majority of my savings will always be invested in the long-term portion.

Of the 95% in my long-term investment strategy, I have 70% in non-leveraged index funds. The long-term investment strategy that I used was an equal balance of equities and bonds. For the majority of 2016, I was invested in 50% in the Total Bond Market Index Fund (VBMFX), 25% S&P Index Fund (VFINX), and 25% Small Cap Index Fund (VEXMX). This mix is designed to be less volatile than the overall market and more importantly, wealth preservation. I currently like this mix because the current bull market is now 8 years old and I want to hedge my investments just in case there’s a correction. The return of my investments using this strategy was +6.3% for 2016.

The remaining 25% of the 95% in my long-term investment strategy is invested in leveraged index funds. I will explain the difference between leveraged and unleveraged index funds, and how to invest in them in a future post. For the majority of 2016, for this portion of my long-term investment strategy, my allocation was 49% Direxion Daily 20+ Year T-Bill 3X Short (TMF), and 17% in 3X S&P (UPRO), 17% in 3X Nasdaq-100 (TQQQ), and 17% 3X Russell 2000 (TNA). The return of my investments using this strategy was +15.9% for 2016.

Here is a visual of my investment allocation and my returns for 2016. As you can see, my personal trading did not pan out so well last year. Fortunately, my total return in 2016 was still 7.2%.

For 2017, the one strategy that I will be using is the equal balance of equities and bonds.

  • Long-Term Index Funds will be:
    • 50% Total Bond Market Index Fund
    • 25% S&P Index Fund
    • 25% Small Cap Index Funds
  • Long-Term Leveraged Index Funds will be:
    • 49% TMF, 17% UPRO, 17% TQQQ, 17% TNA

My disclosure with my holdings are solely for transparency purposes only and not a recommendation. This is what has worked for me and I hope that this post and future posts may help you down the road too. See you soon!

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