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1 – Make More Money, 2- Make More Money, 3 – Make More Money, 4 – Make More Money. There you have it. You can’t go wrong if you just remember the 4 keys to successful investment strategy. Oh, if were only so easy! Unfortunately, there are probably about as many investment strategies as there investors. The good thing is that there’s a strategy for everyone. You guessed it, that’s also the bad thing.

Given everybody’s investment requirements are different, here a 4 keys to a successful, long term investment strategy.

1 - Diversity – Yes, I’m sick of hearing about diversity in this overly PC world, but we’re talking about your portfolio here; diversity in stocks. Over the long term, equities are the best performing asset class, with an average annual return twice that of bonds, which are the next best asset class (but one you should have in your portfolio as well). The operative phrase here is “long term”. Few of us will be investing for 50 years. For most of us the time horizon will be more like 20 to 30 years. There’s a chance that you could experience limited returns with a 20 year time horizon.

My pick for equities are value oriented stocks from healthy companies with a solid earnings history. That’s important on two counts. One, earnings are the prime indicator of stock appreciation. Two, these companies tend to pay great dividends, which can be reinvested. This leads to point number two, which I’ll get to in a second. Make sure you choose stocks from different, diverse industries. You don’t want an industry specific problem to whack a chunk off your portfolio’s value. Choose companies you’d want to own a piece of even if the stock appreciation wasn’t an issue.

Bonds will balance out some of the volatility in your stock holdings. They tend to rise when the stock market falls. In addition, bonds are not as volatile as stocks. The shorter your investment time horizon, the more your portfolio should have in bonds. That’s because if your portfolio is too volatile, a few bad years could knock you backwards so far you’re unable to recover your portfolio’s lost value. You’ll probably not get the return with bonds you’d get with stocks, but your chances of losing a substantial portion are diminished as well. If that loss does happen to you, but you have a long time horizon, you can recover from the setback, and the greater returns typically generated from equity investments will actually let you come out ahead. In the long term, bonds will not beat inflation, so you’ll actually tend to lose purchasing power, not the desired result for long term investing.

Under diversification often happens to those who are invested in company retirement plans that require the purchase of company stock. Remember, you’re already tied to your company through your job. That’s a huge investment in itself. Do you really want all your eggs in one basket? Try to put a few in another.

2 – Dividend Reinvestment – Dividend reinvestment is a wonderful thing. You can actually make little money from the appreciation of your stocks and still experience healthy portfolio growth by reinvesting your dividends. Later, after your portfolio’s all grown up, you can receive a nice income from your dividends as well. You can do this with a Dividend Reinvestment Plan (DRIP) and purchase the stock directly from the company, through a transfer agent, or from a traditional brokerage firm. Some of the company offered plans allow you to purchase the additional stock at a small discount. You could also just use the dividend check to purchase more stock, if there’s no formal plan available, but you’ll lose the benefits provided by formal plans.

Fees from the companies can vary widely, so check them out. Other DRIPS may or may not include additional brokerage (for stock purchased on the open market) or service costs. You’ll then earn dividends on your original shares plus the new shares purchased with dividend earnings, allowing you to purchase even more.

To illustrate the power of dividend reinvestment, consider this: Since 1950 the S&P 500 stocks have returned 7.65% annually. When the dividends from the S&P companies were reinvested, the return jumps to 11.5%! There is obviously an opportunity cost associated with this. After all, if you reinvest the dividends, that’s capital you don’t have available for other purposes, but it will supercharge your portfolio’s performance and can be made automatic. Automatic wealth generation is the best kind, isn’t it?

3 – Long Term Thinking – Unless you plan on retiring in the next few years, you’re in this for the long haul. Don’t check your Ameritrade account everyday. You’re going to have some fluctuations, so just don’t get too worked about it. This isn’t day trading. Unless you’re rebalancing your portfolio, or a major opportunity suddenly appears out of the mist, you’re going to hold on to your stocks for a long time. Don’t go for the quick hit. You may make a nice profit, but more often than not, you’ll take a hit. There’s investing, and then there’s speculating. You should be doing the former.

4 – Planning – As in business, you should have an investing plan. What are your goals? What are your options for meeting them? If you have a formalized plan, it’ll be much easier to stay on track and avoid pitfalls, such as dropping a few thousand on the latest electric scooter company. Just like your business plan, your investment plan will get you to think about all the details and how you’ll address them. If you actually have a path, it’s much easier to stay on it. Like business, the military, motor racing and athletics, investing is a goal oriented, performance based activity. Determine the goal, focus on it, and plan to achieve it.