Lauren Garner is the vice president of demand generation and partnerships at Ascent Funding. A specialist in finance and loan expertise, she focuses on financial management, strategic partnerships, enhancing financial literacy and fostering sustainable growth in lending.
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In her personal financial life, she follows the same professional advice she gives to the clients she serves: Create an efficient but simple and sustainable strategy for picking successful long-term investments.
Here’s how she decides where to put her own money to work on pursuing long-term gains:
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Align Your Investments With Your Investment Goals
Different investments serve different purposes across different life phases and financial objectives. The first step is to ask yourself why you’re investing and which investments are most likely to get you where you want to be.
“I start by ensuring any investment aligns with my long-term financial goals,” Garner said, “whether it’s retirement, education savings or a down payment on a property.”
Spread Your Money Around so You Can’t Lose It All at Once
Smart investors avoid betting too big on one security, sector or stock to mitigate and compartmentalize losses during tumultuous markets. It’s the financial body armor of diversification, a cardinal rule of risking money to make money.
“I spread my investments across different asset classes like stocks, bonds and real estate to manage risk and volatility,” Garner said.
Big Gains Require Big Risks — How Much Can You Handle?
Risk vs. reward is one of the foundational concepts of investing — safe bets rarely deliver impressive returns. Depending on your age, goals, income, family dynamic and countless other personal, professional and financial factors, risk assessment must precede any investment.
“I assess my own comfort level with risk,” Garner said. “I’m willing to take on more risk for potentially higher returns in my earlier years, but become more conservative as I near retirement.”
Like Your Teachers Told You — Do Your Homework
No matter which investment she’s considering, Garner never pulls the trigger before she does the tedious but absolutely necessary work of conducting thorough research.
“I dive into company financials, industry trends and analyst reports,” she said. “For mutual funds and ETFs, I evaluate the experience and track record of the fund manager.”
Perhaps most importantly: She always ensures she understands the hidden costs that can nibble away at long-term gains until big bites are missing from your nest egg.
“I scrutinize expense ratios and other fees,” she said, “as these can eat into returns over time.”
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Watch Out for Red Flags and Heed Them When You See Them
Knowing what not to invest in makes it much easier to winnow down the list of prospective winners. For Garner, that includes just about anything that’s overly complex.
“If I can’t understand it, I don’t invest in it,” she said.
Next, Garner knows there’s no such thing as guaranteed returns, and she avoids anything that comes with promises that seem unkeepable.
“If it sounds too good to be true, it probably is,” she said.
Another red flag is a lack of transparency — and secrecy sends her packing: “Companies that don’t readily share information raise concerns.”
Hitting the ‘Buy’ Button Is Just the Start — Portfolio TLC Is Forever
Many people mistake “long-term investing” with “set it and forget it,” but tuning out and letting autopilot complacency set in is a recipe for failure. At least some of the work you put in to pick the right investments will go to waste if you don’t put in the ongoing work of continuous portfolio analysis and maintenance.
“I review my portfolio at least annually, or more often if market conditions change significantly,” Garner said.
She also rebalances occasionally to make sure her investments stay within her desired proportions and percentages.
“I adjust my asset allocation periodically to maintain my desired risk level,” she said.
The final part of Garner’s portfolio maintenance protocol is year-end tax-loss harvesting, which lets her jettison underperforming investments while minimizing her obligation to the IRS.
“I strategically sell losing investments to offset gains and reduce tax liability,” she said.
Know When It’s Time To Switch Things Up
Investing for the long term does not always mean buying and holding forever. Knowing how to pick long-term investments is a skill you’ll use forever as your financial goals and life circumstances evolve.
“A major life event might necessitate a shift in strategy,” Garner said.
One of the most apparent signs that it’s time for a change is the nagging presence of a chronic underperformer.
“If an investment consistently lags behind its benchmark or peers, it may be time to move on,” she said.
Most commonly, investments change with age as retirement draws nearer and there’s less time to make up for bad bets. “As I get older, my comfort level with risk may change,” Garner said. “That will require adjustments to my portfolio.”
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This article originally appeared on GOBankingRates.com: I’m a Financial Expert: This Is How I Pick My Long-Term Investments