10 Steps to Improve Returns – Investment Checklist

Investment Checklist for Index Investors

DIY Investor Checklist - FAQ

As a Do-It-Yourself Investor you know that you can get great value out of doing your own homework and investing without incurring any additional costs (and costs add up significantly)

You will also control the re-balancing process and observe how markets evolve over time (which is a humbling exercise and shows that even most professional investors can’t add much value over the long term)

You may have a plan but would like to get a second opinion – did I miss something? While Investment Advice is always personal (and this website only gives broad guidance not tailored advice) there are some common questions Investors are seeking  to answer before starting out investing

Index Investment Checklist

  • Different objectives drive different asset allocations in your portfolio
  • You will need a prudent approach if investing for the short or medium term e.g. House downpayment or Children Education and must protect your capital against market volatility 
  • On the other hand, if you want to be financially independent, retire early and have a long term vision market volatility may help you achieve great returns over time. A typical model portfolio will be more aggressive towards long term returns
  • If you are approaching retirement and/or focused on regular cash flows and want to reduce Equity Risk you may look at Corporate Bonds (this section is currently for US Investors only - Europeans, please subscribe to newsletter be posted)

  • If you ever wondered about the biggest stock market crashes, specifically: How much can I lose? How long will a downturn last? How quickly can I recover my savings? Here is a comprehensive answer on how to protect your portfolio

  • Bonds help reduce the volatility in your portfolio and protect your capital during market sell-offs
  • Unless you have a very long time horizon and very high risk tolerance you need Bonds in your Portfolio -  understand why
  • Understanding your risk tolerance and time horizon is key to your Financial Success and will determine up to 90% of your portfolio performance
  • Take a questionnaire first to understand what Stocks/Bond allocation is suitable in your situation

  • It depends on your personal situation - if you already have Inflation protection with assets like real estate it may not be as necessary
  • However, within your Bond allocation you may also consider a small part of Inflation Protected Bonds and/or Gold
  • The likelihood of Inflation is currently low but as with any financial risks these will come unexpected and may have significant impact on your portfolio performance

  • Based on Research2 out of 3 times investing Lump Sum immediately is better than Dollar Cost Averaging (with 2% incremental returns over a 12-month period)
  • However, if you are deploying savings in a volatile market it may be more comfortable to invest in regular intervals over a certain period (e.g. 12 months)
  • Based on the same research if you decide to deploy cash over time stick to the discipline and invest on a regular monthly basis over 12 months
  • Also, don’t spread it out over more than 12 months (you can’t beat the lump sum investment over a longer time period)

  • Is your portfolio needlessly complicated? Do you have asset classes you don't necessarily need that will make portfolio re-balancing overly complicated?  Do you have single name Stocks?
  • Understand how to clean up your portfolio from unnecessary assets 
  • While Financial Theory is clear on  your chances of beating the market with stock selection, if you really want to invest in single name stocks keep individual stocks up to a maximum of 5 to 10% of your portfolio (aka play money)

  • Do you have multiple ETFs covering the same markets and/or countries? 
  • Before investing in International Markets especially if you're based in Europe/UK have a look at indices you want your ETFs to track all capital markets 
  • You want to reduce any overlaps. It may make sense to have some if you are investing from Europe/UK and want World exposure (e.g. through MSCI ACWIbut also overweight your local country (e.g. add some FTSE or CAC 40 Index exposure). Be aware of home bias, though

  • Tax is a painful but important topic in long term investing
  • While this website is not focused on taxes you should make sure to research all local tax schemes in your country to reduce your tax liability e.g. ISA and SIPP for UK Investors 
  • Note that ETFs are potentially taxed on three levels including the domicile of the underlying assets, the domicile of the ETF and your fiscal residency 

[ This investment checklist is currently being researched - please subscribe to the below newsletter to be posted on updated findings ]

  • Distributing ETFs will pay dividends and generate regular income from your portfolio that you can spend if you need to
  • Accumulating funds will maximize your future returns as they automatically reinvest your income back into the market with no extra expenses (saves your time and reduces fees)
  • Both options i.e. accumulating and distributing (aka dividend paying) may not always be available
  • In this case it's good to remain flexible
  • Depending on your country of residence the choice may have tax consequences and a wise selection of ETFs may increase your returns

  • The cheapest fund might not always be the best choice but it has been heavily research that fees are the single most important predictors of investment success 
  • Are you paying more than 0.4% in fees on any single ETFs in your portfolio? Are there funds for your desired asset classes with lower expense ratios available through your broker?
  • Consider switching - perhaps during a re-balacing exercise to reduce transaction costs
  • Run two ETFs with their expense ratios in my ETF fee calculator to understand the long term impact it will have on your returns

  • Currencies can be confusing but there are certain rules that make hedging process easier
  • If you hold international bond funds that are not hedged you may consider switching to a hedged ETF to reduce portfolio volatility since two thirds of risk in international bonds comes from currencies
  • Over the long term you should keep your international Equity funds unhedged, here is why

  • It is important to have a spreadsheet tracking your overall portfolio
  • This is especially true because you need to separate and place your ETFs into different accounts based on tax advantages you will get (e.g. it may be wise to place Bond ETFs that pay dividends into a non-taxable account (e.g. ISA in the UK) and accumulating Equity ETFs into taxable accounts.
  • Taxes are a separate topic that you need to research for your country - some broad guidance will be provided here in due course 
  • The domiciliation of an ETF is also important because of tax impact

[ This investment checklist is currently being researched - please subscribe to the below newsletter to be posted on updated findings ]

  • The general guidance is that re-balancing frequency has low impact on overall portfolio performance as long as you do it
  • Choose a rule - whether it's deviation for your long term asset allocation or based on time period (e.g. annually) and stick to it

More research coming your way in the next weeks

[ This investment checklist is currently being researched - please subscribe to the below newsletter to be posted on updated findings ]

Investment Checklist

Stay tuned

This Investment  Checklist is work-in-progress and will be expanded as resources are added to the website to guide you through the investment process. Exciting things are in the pipeline – if you want to know more subscribe to the newsletter below

Good luck with your Investments!

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The information provided in Bankeronwheels.com is general in nature only and does not constitute personal financial advice.The information has been prepared without taking into account a reader’s personal objectives, financial situation or needs.

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