by John B

Created on: July 18, 2008

How would you like to have an investment strategy that automatically takes advantage of some of the most widely accepted investment principals and takes all of the nasty emotion out of investing? I have come up with this strategy which I have been following for several years. And those years have been some of the most volatile in market history but I have continued to follow it successfully and more importantly, I can sleep at night. If you are looking to get rich quick, look elsewhere. If you are looking to get rich slow and be able to weather some storms then read on.

This is a long-term strategy that applies to money that you control that you expect to use at some future date, I would say at least seven to ten years from now. You can adjust the strategy to your liking depending on your risk tolerance and time horizon. One note though, higher risks and longer timelines should result in higher returns.

The principles I have combined in my strategy include: market timing, dollar cost averaging, and asset allocation.

The debate as to whether or not market timing is a good strategy or not will likely never end. There are proponents that say millions have been made timing the market and can point to historical evidence. The opponents could be equally convincing by showing historical data showing where millions have been lost. So there is no point in debating that here. My strategy will include some degree of market timing but it is automatic.

One strategy that most if not all long-term money managers agree on is dollar cost averaging. This in short is investing a fixed sum at regular intervals in an asset. You acquire a higher number of units when the price is depressed and fewer when the price is high; thereby obtaining a lower average cost that the average cost of the asset over the same period.

The other strategy that the smart-money agrees on is asset allocation. You need to be diversified across several asset classes and geographies in order to gain higher than average returns over time. This strategy also ensures that you are not wiped out by a crash in one market, country or company.

So now onto the strategy. First order of business is getting a discount brokerage account with the lowest fees possible. You do not need to pay anyone to baby-sit your money, that's your new job. Second task is dividing your pile of money into two piles. One will generate regular income; the other will receive that income on a regular basis. How you divide them is a more a question

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