After the recent and extreme turmoil we have experienced in the financial markets, it seems like in every newspaper or magazine you can find an article about where to invest in 2010.  So, where do you put your retirement nest egg and what do you believe?

Times like these provide a good opportunity to reflect back on all that is important when it comes to investing.  So let’s put the magazine articles to the side and re-examine the important fundamentals that make up our investment philosophy.

There are few things you can control when it comes to investing, and the short-term direction of the market is not one of them.  Taking bets on the next hot stock or market sector is not the wisest way to rebuild your retirement portfolio.  The question of where to invest in 2010 should not be based upon current “hot stocks” proclaimed by the media, but rather by revisiting the fundamentals of sound, low-cost investing.

Our investment philosophy is based on the theory that markets work.  This means that we feel that any potential opportunity in a particular market sector or stock is already built into the price at which you can buy it.  So, choosing segments of the market to invest in just amplifies your investment risk to levels much too high to justify the potential returns.  Thus, let’s go over a few of the simple disciplines that not only make investing more simplistic, but also give you the best chance to meet your retirement goals.

The three factors that any investor has control over when it comes to investing are:

1.  The amount of risk taken in your retirement portfolio.
2.  The amount you save leading up to retirement.
3.  The amount you pay to be invested in those markets.

The amount of risk in your portfolio is a direct measure of how much risk you are willing to take, and also the amount of risk you need to take to reach your desired standard of living in retirement.  Unfortunately, these two factors are usually not the same, especially after the recent market decline, so finding a comfortable median that you can tolerate is usually the best solution.

The amount you save is self explanatory and entirely up to you.  Everyone wishes they could save more, but unfortunately “life” finds ways to make that very challenging.

The amount you pay to be invested in the market is very important to us here at Rockbridge and is the cornerstone behind our investment philosophy.  By controlling and reducing investment costs, over time, we can add significant return to your retirement portfolio.  That is why our model portfolios are comprised of low-cost index funds, which have an average investment cost about 1% lower than the industry average.

By controlling these three components of the investment process, you give yourself a much better chance of reaching your long-term goals.  The main thing to remember here is that these are long-term goals, and in the process of reaching them there will be some obstacles along the way.  So do your best to ignore the short-term media and quick fixes that they propose, and keep your eye on the target and goals that make up your retirement!