That’s why I like dividend stocks.

Different strokes

What if your nest egg is looking a little undersized? Then you might have to create a portfolio like many of the experts we also talk to, who are, when you think about it, more short-term investors.

Take for example, someone like Roger Montgomery, who buys stocks when the market price is less than his so-called intrinsic value. Well, when the market price goes above this, he could be a seller, as he has to produce his results quarterly for his fund members. Fund managers are trying to outperform the index and they often live by an adage that you never go broke taking profit.

If you fall into this ‘need to grow my nest egg’ category, you could even have been in a margin loan product for the past couple of years and you might be planning to ride this product to the end of 2014. If you are thrill-seeker, you could push it out to 2015, but that could be risky.

As a safe investor – I know who I am – I am risking this bull market into 2015 but I will be watching for signs that it would be good to unload some stocks that will be crushed in a crash.

However, there will be bank stocks that I bought at very low levels that I might never sell, and instead, simply add to them when a crash lowers their share prices.

Of course, if I was retired or on a transition to retirement pension, and therefore in a tax-free zone for the part of my super in pension mode, I could sell all my stocks in 2015, avoid capital gains tax and simply sit in a term deposit until the market slides again.

Ultimately, your investment strategy has to start with you answering the question – who do you think you are?

How do you work out who you are?

Some people use a trusted adviser, who can do calculations on where your nest egg is heading and link this to your goals, as well as your appetite for risk, to come up with an informed opinion. Others do the calculations themselves.

So, how do you that?

It’s not easy without computer programs but you can rely on simple rules of thumb, such as the Rule of 72, that tells you that if your $500,000 in super is invested for an average return of, say, 8% then it will double every nine years.

Next you have to have an investment strategy that will give you 8%. For that, you should rely on the idea that a good quality portfolio should average 10% per annum over 10 years, despite the fact that three years out of 10 will be shockers, when you will hate yourself, your investment strategy and super.

Oh, that’s if you’re a normal person. The intention of the Switzer Super Report is to make you abnormal.

The abnormal person expects crashes and big corrections and they are buyers of great companies during these times. That’s when this report will be doing the heavy lifting to keep you on the abnormal course that will sustain and grow that nest egg for as long as you live.

I recall one of our financial planning clients who had a great nest egg and who retired in his 50s and as we put together his portfolio in the early post-shadows of the GFC, he said to me that he never wanted to explain to his daughters that he had lost his or their fortune!

He didn’t lose it and has made nice gains since 2009.

If the investment strategy is right and you know who you are and you have the right guidance, you can build a fortune – not lose one.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.