Reduce expenses: Trading commissions, market impact costs, bid/ask spreads, administrative expenses, and sales commissions (if any) directly reduce net investment returns. The combined effect of these costs can be difficult to compute and can consume a surprisingly high proportion of the gross investment returns offered by the capital markets.
Diversify systematically: A diversified strategy captures the compensated risk dimensions of the markets in the most reliable fashion.
Minimize taxes: Utilizing efficient tax strategies including the use of tax free investments and annual tax harvesting allows investors to garner a greater potential net return.
Apply discipline: Portfolio structure is the key determinant of results. The principal challenge for investors is to develop an asset allocation policy that matches an investor’s risk preferences with returns offered by the capital markets. A successful policy is one that can be adhered to without anxiety in both good and bad markets.
Think long-term: Markets may be volatile and unpredictable in the short term, reducing an investors probability of success. By thinking long-term, one can be more likely of achieving goals and reaching financial independence.