What You Need to Know Before the Smartest Money’s 9 Steps of Investing Will Work for You

Last Friday we discussed The Smartest Money’s 9 Steps of Investing—how to identify great investments and assemble them into the best possible portfolio:

1. Determine the value of your investable assets.

2. Determine your investment time horizon.

3. Determine the amount of quarterly income you’ll need from your investable assets for the duration of your investment time horizon.

4. Determine the cash reserves you’ll need in addition to your income.

5. Calculate the risk-adjusted performance of the investments you have access to (across all asset classes) as measured since January 2007 or earlier:

   1. Summers Total Risk-Adjusted Performance Measure (“S_Ω” )

   2. Maximum Drawdown Duration Required to Realize the Expected Return (“MDDD_S”)

6. Park your cash reserve requirements from Step 4. into a money market account.

7. Divide your quarterly income requirements from Step 3. by the highest annual percentage yield (“APY”)  of the fixed income investment(s) you have access to that have a duration less than or equal to your investment time horizon and have not cut dividends or distributions since January 2007 or earlier; allocate that amount to that/those investment(s).

8. Allocate what remains of your investable assets after Steps 6. and 7. to the investment(s) with the highest S_Ω and an MDDD_S that is less than or equal to your investment time horizon.

9. Re-evaluate and repeat steps 1. through 8. periodically.

Today at 3pm EDT, we will reveal what you need to know for before the smartest money’s 9 steps of investing will work for you…