The Single Most Important Thing You Can Control (when it comes to your investments)

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For the average investor, the keys to investing success, over the long-term, are diversification and portfolio re-balancing, pretty straight forward.

But before you can even diversify and re-balance your investments, you need to choose the type of investments to make up your accounts, and I’ve written a lot about that, as well.

Here’s where you need to listen up!

Before you choose your investments you need to understand what you CAN and CAN NOT control. I think investors for the most part, have this all wrong.

What am I talking about?

A lot of investors are under the notion that it’s their duty to control the performance of their investments. I say forget about doing this, this is completely out of your control, for the most part. Thinking that you can control your investment performance is the first critical mistake the average investor makes. I would suggest ridding your brain of these thoughts and focusing on what you CAN control.

What can you control?

The single most important thing you CAN control are the costs associated with your investments. End of story!

If you understand the cost structure of the investments that make up your underlying portfolio, then you are on your way to making better decisions and laying the foundation for long-term investment success.

With that said, it’s not that easy sometimes to uncover the true costs. Remember, there are trillion dollar industries, that have grown to that size, by making it hard for you to see the forest from the trees. It’s your duty to educate yourself or find someone who can help you with all this. (shameless plug for the blog;)

I’ve written about most of these topics right here and if you go back through my Mutual funds and ETF categories you will find all the information you need to educate yourself on these matters.

Become masterfully frugal with your investment selections

The approach you need to take with your investments is similar, in certain respects, to the approach recommended by personal finance gurus, to develop a successful budget. A big part of becoming net positive is understanding your costs and then making the appropriate decisions.

After reading many personal finance blogs, it’s obvious why ‘those in the know’ (when it comes to evaluating cost) will come out ahead. Apply that same frugal mindset to your investments and you will come out ahead there too!

• This post was featured in the 142nd Carnival of Personal Finance over on The Baglady, which had a very interesting homeless theme to the carnival.

Tags: ETF, Financial Planning Retirement and Now!, Mutual Funds