PRINCIPLES OF STRATEGIC WEALTH CREATION

Banks and brokers, stocks and bonds. These are the ingredients of traditional investing -- but currently, they tend to preserve rather than create wealth. This is because no matter how well thought-out your portfolio, investment expenses, taxes and inflation will ultimately impact your attempts at wealth creation.

Investors who wish to create rather than preserve wealth should aim toward annual returns of 10 percent or higher. Investors cannot achieve this by following traditional stock/bond recipes or listening to their bankers or financial advisers, who tend to create generic investment recommendations based on analyzing opportunities quantitatively.
What should be at the heart of any successful investment endeavor are the immense value of clients’ personal knowledge, skills and resources. Investors should build strengths and core competencies that enable them to invest successfully. They should develop their own strategy based on seven highly interconnected principles:

1. Build on core strengths and competencies. This is the essence, the raw material needed to help investors succeed.
2. Exploit opportunities. Build on your knowledge of a specific field. Scan the environment and be sure to take a long-range view. 
3. Make use of networks. Keep core competencies at the heart of the network. Do not overlook the importance of weak ties. 
4. Apply an investment approach that differentiates you from others. Decide where you want to differentiate: A niche asset class, industry or geography? Build core competencies that differentiate you and apply an indirect approach. 
5. Prevent threats and understand how to handle risks reasonably. Threats and risk may inevitably lead to losses. Manage them through rigorous analysis and careful selection of core competencies that need to be developed. 
6. Fit the time dimension by observing trends and cycles. Timing is crucial. Be sure to think in cycles. Apply the big picture, and clarify your investment horizon. Also, ensure strategic flexibility. Be creative and courageous, but also patient. 
7. Execute with efficiency. Avoid or reduce fees and implement your strategy at a low cost. Watch out for opportunity costs.

Written by Daniella Davenport