Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a beginning or experienced investor, these weekly updates are designed to give you specific advice about investing money. Each Investor Toolkit update gives you a fundamental piece of investing strategy, and shows you how you can put it into practice right away.

Today’s tip: “Following these 8 tips can go a long way toward ensuring your financial happiness.”

Over time, investors are bombarded with promises of lifelong financial happiness, some more legitimate than others. But there is no single magic formula for financial security. Instead, you should look at a series of useful steps that will help you secure your financial well-being.

Our approach begins with our time-tested 3-pronged strategy: investing money mainly in well-established, dividend-paying companies, spreading your money out across the five main economic sectors (Manufacturing & Industry; Resources; Consumer; Finance; and Utilities); and avoiding or downplaying stocks in the broker/media limelight.

If you follow that up by investing money with a disciplined plan for saving during your working years, and selling your stocks as needed in retirement, you’re on the right track to optimal investment gains. Here are 8 tips to help you make that plan work most effectively.

1. Only buy bonds or other fixed-return investments if interest rates are high enough to be attractive. Don’t buy bonds just to “cut your risk.” After all, our 3-part advice already takes a lot of the long-term risk out of investing. Adding bonds to the mix will simply cut the volatility of your portfolio value in any given year. But it does so at the cost of increasing your risk of loss to inflation.
2. No matter how attractive they may seem, always take a skeptical approach to investing money in financial products that add an extra percentage point or more to your yearly costs. Make sure the expense is worth it.

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3. Be skeptical of advice that comes from advisors or institutions that sell insurance or other fee-heavy investment and financial products. The financial software they use naturally churns out investment plans that involve the kind of frequently-hidden costs we mentioned in point 2.
4. There is no secret investment growth hormone in insurance products, so our advice is that you should only buy what you need. For most people, this mostly this comes down to term life insurance for the main breadwinners in the family unit.
5. Before you start investing money in disability or income-replacement insurance, read all the fine print closely. Just as important, assume the insurance company will decide borderline cases in its own favour, since that’s often what happens. Viewed in that light, you won’t like what you find. That’s why they put it in the fine print.
6. In contrast, we believe you should be investing money as early as is practical of all registered savings plans—RRSPs, TFSAs, etc. RESPs are particularly attractive, due to the government grants that come with them.
7. Put off buying a house until you can afford one that you’re likely to want to live in for at least 10 years, if not 20 or more. Real-estate commissions and other costs of selling one home and buying another add up to a lot of money. Worse, it comes out of your after-tax income. You’ll be far better off financially if you instead keep that money invested at, say, 6% to 8%, all the more if you can do this on a tax-deferred basis.
8. Put off marriage and children until you find a potential mate you think you’ll want to stay with as long as you live. Of course, you may change your mind—nearly half of all marriages end in divorce.
   
   But before beginning a family, you need to recognize the economic cost of divorce. Supporting two households for a decade or two takes a huge bite out of your retirement savings. The current dollars themselves are a major drain. But you lose far more by missing out on an opportunity for decades of compound investment growth.

If you’d like me to personally apply my time-tested investment advice to your portfolio, you should consider becoming a client of my Successful Investor Wealth Management service. Click here to learn more.