Investment Planning


Most people are familiar with these types of traditional investments. The expectation of these investments is capital appreciation, dividends or interest earnings.


A stock is an instrument that signifies an equity ownership in a corporation and represents a claim on part of the corporation’s assets and earnings. A single share of the stock represents fractional ownership of the corporation in proportion to the total number of shares.


A bond is an instrument of indebtedness issued by governments or companies which promise to pay an annual return until the debt is repaid. The value of the investment changes as the level of general interest rates fluctuate, causing the bond to become more or less valuable. The most common types of bonds include municipal bonds and corporate bonds. Bonds are a form of loan where the bond is the lender (creditor), the issuer of the bond is the borrower (debtor), and the coupon is the interest.


A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. Mutual funds have advantages and disadvantages compared to direct investing in individual securities. The primary advantages of mutual funds are that they provide economies of scale, a higher level of diversification, they provide liquidity, and they are managed by professional investors. On the negative side, investors in a mutual fund must pay various fees and expenses.


An exchange-traded fund is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds and generally operates with an arbitrage mechanism designed to keep it trading close to its net asset value, although deviations can occasionally occur. Most ETFs track an index, such as a stock index or bond index. ETFs may be attractive as investments because of their low costs, tax efficiency, and stock-like features.


The Dow Jones Industrial Average (DJIA), usually referred to as simply “The Dow”, is a price-weighted average of 30 large, publicly owned companies traded on the New York Stock Exchange (NYSE) and the NASDAQ.

The DJIA is one of the oldest, single most-watched indices in the world and includes companies such as the Apple, Home Depot, Wal-Mart and Boeing. When the TV networks say “the market is up today,” they are generally referring to the Dow. The DJIA is an indication of the American economy, however it does not include smaller companies. The DJIA was invented by Charles Dow in 1896.


The NASDAQ Stock Market, also known simply NASDAQ, is a global electronic marketplace for buying and selling securities, as well as the benchmark index for U.S. technology stocks. It is the second-largest exchange in the world by market capitalization, behind only the New York Stock Exchange located in the same city. NASDAQ was created by the National Association of Securities Dealers (NASD) to enable investors to trade securities on a computerized, speedy and transparent system, and commenced operations on February 8, 1971. The term “NASDAQ” is also used to refer to the NASDAQ Composite, an index of more than 3,000 stocks listed on the NASDAQ exchange that includes the world’s foremost technology and biotech giants such as Apple, Google, Microsoft, Facebook, Amazon, Tesla and Adobe.

7. THE S&P 500

The Standard & Poor’s 500, often abbreviated as the S&P 500, or just the S&P, is an American stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ. The S&P 500 index components and their weightings are determined by S&P Dow Jones Indices. It represents all major sectors of the US economy including technology, healthcare, manufacturing, energy, pharmaceuticals and financials. The diverse index accurately reflects the U.S. economy much better than the Dow.


We have all heard the phrase “Don’t put all of your eggs in one basket.” That is the basic premise of Asset Allocation. The idea is to balance out risk versus reward by diversifying your investments among different strategies, adjusting the percentage of each asset in an investment portfolio according to the investor’s risk tolerance, goals and investment time frame. The focus is on the characteristics of the overall portfolio. Such a strategy contrasts with an approach that focuses on individual assets.

Consider a one-time investment of $20,000 divided up into 5 different investment strategies, each with an equal $4,000 allocated, invested for 20 years:

The above example shows how with diversification, you can still wind up ahead over time, even when some investments lose money and perform badly. While you can diversify into different investments, asset allocation involves different investment strategies or objectives.

Examples of investment strategies are:

  • Conservative Strategy: 65% invested in Fixed Income, 35% in large company stocks.
  • Moderate Strategy: 50% invested in Fixed Income, 50% in large company stocks.
  • Moderate Growth: 30% invested in Fixed Income, 50% in large company stocks, 20% in mid-cap stocks.
  • Aggressive Growth: 30% in large company stocks, 35% in mid-cap stocks, 35% in small-cap stocks. As things change in your life, you can adjust your asset allocation. Generally, when you are younger, you may be more aggressive since you have the benefit of time. As you get older, you tend to become more conservative, thus you constantly should adjust your asset allocation as you are willing to take less risk.


Determining when to get into the market is nearly impossible, as you never know when the market is at its highest high, or its lowest low. Dollar cost averaging is a strategy that involves systematically investing each month to help offset the market risk associated with purchasing variable investments, such as stocks, mutual funds or other equity investments. Dollar cost averaging is not always the most profitable way to invest a large sum of money, but it minimizes downside risk. The idea is to lower the average cost per share by averaging your purchase price over time.

As the number of shares that can be bought for a fixed amount of money varies inversely with their price, dollar cost averaging leads to more shares being purchased when their price is low and fewer when they are expensive. As a result, dollar cost averaging may lower the total average cost per share of the investment, giving you a lower overall cost for the shares purchased over time.

Total Contributions: $1,200
Average Cost per Share: $525 ÷ 6 months = $87.50

Total Shares Accumulated: 21

You can see that even though the share price started as high as $200 per share and ended up as only 1⁄4 of its original price, 21 shares were purchased, and the risk was averaged out. The more shares that you have, the better off you will be when the shares rise back up. Keep in mind that this example only shows a 6-month period. During a prolonged down market, the recovery may take much longer. Selling at the bottom makes you realize a loss. As with any investment, you must make calculated decisions based on your goals and risk tolerance.


An Alternative Investment is an investment in asset classes other than stocks, bonds, mutual funds, exchange-traded funds or cash. An Alternative Investment may include tangible assets such as real estate, land and precious metals, and also includes financial assets such as life settlements, land leases and tax lien certificates. Many of these Alternative Investments can be held in a Self-Directed IRA or a Solo 401k.


Land banking is the acquisition of parcels of land for future sale or development. This has been widely popularized in Southern California with pre-developed commercial land. The idea is to purchase land that is already in the path of great growth, with level usable land, infrastructure, and near major population centers, hold it for a number of years, then finally sell it for a profit.

History has shown that significant asset growth can be accomplished through holding real estate assets, however the main driver of the value is with the land, not in the value of the house.

The following 10 key indicators should be present when deciding to invest in Land Banking:

  • Level, usable land.
  • Close proximity to a major metropolitan area.
  • Growth industries should already be in place and expanding.
  • An abundant water supply.
  • Adequate utilities designed for massive growth.
  • Accessible to mass-transportation, airports, trains, etc.
  • Large commercial and residential development.
  • Studies projecting a healthy population growth.
  • Educational facilities
  • Regional master plan for community and municipal infrastructure. Land Banking, when chosen wisely as indicated above, can be a rather a safe and secure long-term strategy that is incorporated in a diversified financial plan.