Investing Strategy for 2009

At the end of 2008, it isn’t an easy task to look ahead and see what stockinvestors should do.

However, there is a simple way to choose one’s investment strategy. I have always firmly believed that the only approach to investing that could possibly be of any use to the retail, non-professional investor would be one that doesn’t have to be fine-tuned according to market conditions.

If you needed to have even a vaguely correct idea of what lies ahead for the financial markets in order to decide which mutual fund to buy, then you’ve failed before you’ve even begun. So here’s a general outline of the investment strategy you should be following in 2009, and indeed in any other year, along with a list of five income and five growth funds with which to implement the strategy.

The first step is not to look at investments but instead at your own life and try and make a liberal estimate of how much of your savings you would need to tap into over the next five to seven years. This would include some sort of an emergency amount, plus predictable big-ticket expenses such as weddings, education, the down payment on a house and such things.

This is the amount you should hold in debt investments which could be anything from PPF to short-term debt mutual funds.

The rest should be in diversified equity mutual funds with a good long-term track record.

Any fresh investments into equity funds should be done gradually and continuously regardless of the state of the markets. Don’t invest in too many funds—four or five is enough diversification.

You’ll have to do a little bit of home work to find funds with a good long-term track record but it’s not difficult. Of course, investments can improve or degrade so these would have to monitored, perhaps, a couple of times a year.

As for insurance, make a liberal estimate of the amount of money your dependents will need if you die soon.