Rising inflation. Ongoing supply chain problems. International conflict.
There’s a lot of volatility in the market today, which has many entrepreneurs and investors feeling stressed. With this much uncertainty, choosing how to allocate money and being confident in those choices can be challenging. Too often, people get trapped in analysis paralysis or needlessly lose sleep second-guessing themselves.
One of the best ways to ease that stress is to take the emotion out of your decision-making. And the best way to take emotion out of the equation is to establish a clear set of investing criteria. By knowing precisely what a good investment looks like, you’ll be able to make wise decisions quickly, efficiently and confidently, no matter what else is happening in the world.
Step 1: Understand who you are and what you want
Investing is not a one-size-fits-all process. An excellent opportunity for you may not be great for someone who doesn’t share your interests, risk profile and goals. This means establishing your investing criteria begins with introspection.
Spend time answering the following questions:
- What kind of lifestyle do you want your investments to fund? The answer to this question will help you begin to create accurate financial targets .
- Are there certain types of assets you enjoy more than others? Some people love buying and managing real estate , while others prefer commodities or currency. Some people are deeply involved in a single business, while others enjoy the thrill of serial entrepreneurship.
- How do you feel about using leverage? The extent to which you’re willing to use borrowed capital as a source of funding will impact the types of investments that make it onto your preferred list. Strategically using leverage can dramatically increase your opportunities to generate returns, but this technique isn’t a good fit for everyone.
Step 2: Use the tax law to your advantage
I always tell my clients: The tax law is a series of incentives. It is the government’s way of telling you what it wants you to do, and when you listen, the government is willing to invest with you. So, while there are a lot of investments that will increase your taxes as you earn more money, there are some excellent options that the government is so excited to have you make it is willing to reduce or even eliminate your taxes.
How does this work? Governments around the world recognize their societies are better off when businesses and private citizens invest in things like creating jobs, building housing and growing food. So, they create tax incentives to promote these investments.
I recently wrapped up an in-depth study of these incentives in the U.S. and 14 other countries and identified seven categories of investments that every government supports. The categories are:
- Technology, research and development
- Real estate
- Retirement savings
Which of these categories matches the criteria you established in step 1? Spend time learning more about what incentives the government offers to investors in the categories that interest you most. When you use these incentives, you’re putting yourself in a position to build wealth faster by decreasing the amount of money you’re paying in taxes.
Choose the category that fits you best. Then, double down on your research. Ideally, you will become narrowly focused on a specific niche within your chosen category. The more you learn about a specific investment and the more focused you become, the more you will increase your expertise. The greater your expertise, the lower your risk.
Step 3: Make a checklist
Now that you have clarified what you’re looking for in an investment and identified the tax-effective categories in which you’ll invest, you can finalize the specific criteria you’ll use for evaluating each option. Your goal is to create a detailed checklist that lets you quickly and confidently determine which investments suit you best. Once you have established this framework within your investing niche, you’ll be able to scale your investment process.
Your list should include the prospective investments:
- Target rate of return
- Expected cash flow
- Leverage requirements
- Exit strategy
- And, of course, tax repercussions
Creating this framework isn’t a black-and-white task. Your goals, circumstances and values will determine what makes an investment a good fit for you.
You absolutely can and should do this work with the support of your CPA and other financial advisors . They can help you navigate the technical requirements on the tax side and make more precise financial estimates. Having the right team in place, alongside a proven wealth and tax strategy, serves as extra protection from making poor choices in high-stress situations.
At the end of the day, you’ll have the peace of mind that comes from knowing you are making investment decisions based on where you are in life, where you want to go and how you’d like to get there. Plus, when you build your investing strategy in connection with your tax strategy , you’ll be able to make more money, more quickly and pay fewer taxes at the same time.
By Tom Wheelwright
Advisory services are offered through Asset Strategy Advisors, LLC (ASA). Securities are offered through representatives licensed with either Concorde Investment Services, LLC (CIS), member FINRA/SIPC, or RCX Capital Group, LLC (RCX), member FINRA. Insurance is offered through Asset Strategy Financial Group, Inc. (ASFG). ASFG and ASA are independent of CIS and RCX.
Because investor situations and objectives vary this information is not intended to indicate suitability for any individual investor.
This is for informational purposes only, does not represent legal or tax advice does not indicate suitability for any particular investor, and does not constitute an offer to purchase or sell investments. Please consult the appropriate professional regarding your individual circumstance.
Content regarding social security is not associated with or endorsed by the Social Security Administration or any other government agency.
Maximizing your Social Security Benefits assumes foreknowledge of your date of death. If as an example you wait to claim a higher monthly benefit amount but predecease your average life expectancy, it would have been better to claim your benefits at an earlier age with reduced benefits. The data contained in this material was obtained from third-party sources believed to be reliable; however, ASA, RCX, ASFG, and CIS do not guarantee the accuracy of the information.
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