Every day, professional financial managers are making money management decisions: whether to buy, whether to sell, whether to buy and hold. The trick to making successful decisions is to follow a procedure.
Every day should be a decision day when managing your financial portfolio, even if your portfolio consists of only a checking account. You should keep a list of the dates and amounts of expected expenditures and compare them to your expected revenues and cash balances. Will you have extra cash? How long before you will need to spend that cash? What do you consider a reasonable return on your investment of that cash, and how much risk are you prepared to take to achieve that return?
Once you have an idea of how much money you have for investment and for how long, you must then research your investment alternatives and the risk each carries. If you cannot afford to lose money, you should confine your investments to Federal Deposit Insurance Corporation insured certificates of deposit, U.S. Treasury securities or high-grade corporate and municipal bonds. With fixed-income securities, you can also immunize your portfolio by placing your money to mature on the dates you will need to spend it. If you can hold the money over time and can accept the risk of low returns or even losses, you might choose to purchase riskier investments such as stock, mutual funds and other packaged investment products.
If you are managing a pension fund or other investment fund under fiduciary management, your decisions are strictly limited by the fund's investment indenture; otherwise, your decisions should always be made under what is called the Prudent Man Rule. This means you should do what a prudent fiduciary would do in similar circumstances. Even if you are managing your own money, it is always best to fully research your investment alternatives and choose the one that provides a good return while limiting risk.
It is never wise to leave decision making to the last minute. When managing a financial portfolio, you should constantly follow economic news, market conditions, technical and fundamental analysis and other pertinent information, so you can formulate over time various investment strategies that you can adopt at a moment's notice.
Mark up your portfolio with notes. Keep a notebook where you list your reasons for buying or selling certain securities. Make sure you indicate your price goals or ROI assumptions. If you have this information saved, you will be able to access it when you need help with your decisions. Without a doubt, the more detailed your record keeping and notes, the more likely your decisions will be successful.