How to boost your portfolio's performance: with the bull market raging back, take these steps to keep your investments on track.

HAVE YOU EVER WONDERED WHAT SEPARATES SUCCESSFUL INVESTORS FROM MARGINAL ONES or from those who get clobbered by Wall Street? The best investors aren't always better stock pickers. Most of them don't boast Ivy League degrees. Nor do they have access to "inside" reformation. In truth, the most successful investors--that is, the ones who consistently make money in up and down markets--are simply the people who make the fewest investing mistakes and those who quickly fix the blunders they do make.

Too often, unsuccessful investors think "If I could just pick the next Microsoft, I'd be rich," or "If only I had sold my stock at its peak, I'd have a fortune." Well, it certainly helps to identify industry-leading companies as potential investments. And "selling high" may bring you one step closer to fattening your bank account. However, the reality is that just buying good investments and selling them for a profit offers absolutely no assurance that you will be a successful investor. In fact, if you only master those two elements of buying and selling, you almost certainly will fail miserably as an investor,

The "Buy Low, Sell High" Myth

"Now wait a minute, you may be saying. "Isn't that the very definition of smart investing--knowing what to buy and when to sell? And what about that old adage, 'buy low and sell high?' Isn't that what this whole investing business is all about?" Actually, nothing could be further from the truth. Here's why: All the buying and selling savvy in the world won't maximize your wealth if you make any number of costly investing missteps.

Consider, for example: What happens if you trade so much that commissions eat away at your profits? What happens if poor planning or impatience leads you to pay extra taxes to Uncle Sam? What happens if you trust an unscrupulous stockbroker, trustee, or accountant, and he skims funds from your account? What happens if your investing strategy fails to take advantage of the benefits of compounded interest?

So sure, you might buy some "winners" for your portfolio--and even sell them at the right time. But what happens if that Wall Street darling you loaded up on nosedives inexplicably right after you purchase it? [There's] nothing terrible about its management, product or the industry in which it operates. Just negative overall "market conditions." These are just a fraction of the possible dilemmas that await beginning and long-time investors alike.

Mastering the Five Phases of Investing

Despite conventional wisdom shrewd investing clearly entails far more than buying and selling know-how. Successful investing involves mastering multi-faceted process and side stepping the dangers lurking at every turn. These dangers must be avoided to maximize investment performance and multiply your wealth.

By now, you may be asking, "If investing transcends buying and selling what else s there?

The investing process involves five distinct abases and once you recognize the many traps that arise during these five stages, you can readily, avoid these perils. And what if you nave already, erred and somehow stepped onto an investing landmine? Don't despair! The Key is to better navigate those ticking time bombs gong forward.

Remember you don't have to be perfect. The best investors just make the fewest mistakes and they readily, recover from the fumbles they do commit. The sooner you realize this basic yet powerful truth, the sooner you can begin to turn almost any perilous situation into a profitable one. If you don't remember anything else from [this article], I would hope that you remember this crucial point: Unsuccessful investors focus on products. They re constantly asking, "What's tee best stock to buy?" By contrast, successful investors focus on toe process of investing. They ask, "What should I be doing to grow my portfolio?"

1 Strategizing to meet you personal goals

2 Buying the right investments

3 Holding are adequately monitoring the investments in your portfolio

4 Selling investments in a judicious manner

5 Dealing effectively with investments intermediaries such as stockbrokers and financial planners 

What Are Your Goals?

So many people simply say, "I would like to save more money," or "I want to invest for the future. "Well, the first question you really need to answer is: For what purpose do you want to save or invest?

We all have personal goals. Some people would like to retire before they turn 60. Others want to build a dream house on the beach. Maybe your ambition is to be able to afford to send your kids to a private college. Or perhaps you're itching to quit your job and form your own company.

All of these personal goals are also financial goals, because it takes money to achieve them. For example, you certainly can't retire in comfort with an empty bank account. Neither can you launch a business without some start-up capital.

Setting Goals Is The Foundation Of Successful Investing

Numerous studies show that people who engage in active goal setting--thinking about their goals and then writing or typing them out--overwhelmingly fare better than people who don't set written goals. This is true in investing and throughout life in general.

There's some science behind this, as well as some common sense. When you write down your goals, and especially when you look at them everyday, they serve as a constant reminder of what you want to achieve. A written mission keeps you focused. It gives you motivation. And perhaps most interestingly, declaring your objectives in black-and-white kicks your subconscious mind into high gear. Without you even trying your brain starts thinking and strategizing about ways in which you can meet those goals--even while you're sleeping.

Investors who don't bother to define any personal goals lack focus. They buy investments indiscriminately, under the false assumption that simply "being in the market" is somehow beneficial. In reality, such misdirected actions are highly harmful. They frequently result in wasted time. money, and energy.

Individuals with hazy or generic goals (like "I want to be rich") are unable to reach them due to an unrealistic or unknown assessment about what it takes to get there. Remember when I said earlier that a lot of people express a general desire to "invest for the future?" Financial planners say that a common refrain among investors is: "I want to have a comfortable retirement."

What exactly does that mean? As you might suspect, it is highly subjective and individualized. For some people, having a "comfortable retirement" may mean making sure their 30-year mortgage is paid off. Others might view free-and-clear ownership of a home as low on the list of priorities. Also, what kind of money are we talking about to achieve "comfort," or your preferred quality of life, in retirement? Will you require $2,500 or $5,000 monthly, $10,000 or perhaps some other amount? Determining these quality of life preferences are what leads us go the importance of setting the right kinds of goals--so-called "smart" goals.

Ready, Set, Goal!

So far, you've figured out why you're investing, or why you want to invest; It's for retirement, that new boat, or the 4,000-square-foot house you want to custom build. Whatever they are, your goals remind you that investing isn't about building wealth simply for wealth's sake. investing should always begin as a goal-oriented process, helping you meet real-life needs and aspirations, As you can tell, goals are personal and values-based.

Still, you'll miss the mark if you stop here. You're far from done in the goal-setting department. Now that you have lumped your goals into short-, medium- and long-term time tables, you will want to really hone in on several key points, Namely, you must establish specific, measurable, and realistic goals, also known as 'smart" goals.

This goals is specific--in terms of the dollar amount required, the cost of the house, as well as the type of the desired. It's measurable because you can readily figure out how much you would have to save each year (roughly $8,009 assuming a modest 4% annual return) to come up with the $25,000 down payment. It's actionable because no amount of dreaming, wishing, or thinking alone will generate the money. You will have to do something. That could mean making automatic deductions from your paycheck reducing frivolous spending, or working a second job to meet the goal. Depending on your income, expenses, debts, etc., this may be a stretch goal. But if you earn $50,000 a year or more. this goal is nevertheless realistic Even if you don't earn $50,000 or more. this goal Is realistic if you are prepared to make financial sacrifices, For instance, do you really need to eat out twice a week for dinner or get 150 premium cable channels in your home?) Finally. this goal can keep you on course because it has a definite time frame--three years.

So How Much Will These Goals Cost?

Ultimately, you will also need to figure out how much money it will take to meet your personal/financial goals. For many short- and medium-term goals, you probably have a pretty good idea of the costs, so you can just plug in the appropriate numbers. For example, the new car you want retails for $25,000, or you have $10,000 in credit card debt you would like to get rid of--and sooner rather than later. But what about those far-away goals, like your retirement in 20 years?

There are scores of retirement calculators on the Internet that will quickly tell you, based on a series of assumptions, one of two things: the amount of money you will have accumulated at retirement if you make X amount of annual contributions or the amount of money you need to save annually in order to accumulate X amount of funds at retirement. To illustrate how these calculators work, let's assume you are 40 years old, you wish to retire at age 65, and you have already stashed away $50,000 in an individual retirement account or 401(k) plan.

In the first example: If you put away $500 a month for retirement, how much money will you have accumulated at retirement in 25 years? The answer depends on how much you plug in as an expected rate of return. Use a figure between 7% and 10%, depending on how much risk you think you would be willing to assume. Don't make the mistake of having an impractical (and/or improbable) outlook about your expected investment returns. (In other words, don't assume you will rack up 25% annual returns. That's an unrealistic projection),

Based on our hypothetical savings of $50,000, and annual contributions of $6,000 ($500 a month times 12 months in a year), you will save $781,059 by retirement. That assumes you will generate 8% returns annually.

In the second example; What if you already know how much you want or need during your golden years? Let's say it's $1 million. The next step then is to figure out how much annual savings is necessary to help you reach your $1 million goal. Again, based on the same set of assumptions, you have 25 years to retirement and $50,000 in current savings and expect your investments will return 8% each year. In this scenario; to wind up with $1 million upon retirement, you must contribute $8,995 annually (or $750 a month) to your nest egg.

How A Financial Planner Can Help

This is where having a good financial planner can be of value. He or she won't just calculate the specific dollar amounts it will take to fund each of your goals. Based on a careful, tailored assessment of your personal situation--your individual risk tolerance, your health, the amount of money you have already saved, the funds you can continue to save regularly, and any other relevant information--that advisor can offer feedback on everything from how feasible your goals are to how you can best prioritize them.

Furthermore, after reviewing your entire portfolio and evaluating the securities in which you will be investing, an advisor can use historical investment averages as a benchmark for setting your targeted investing returns. If you get good service and an advisor who will act as your "financial quarterback," the fees you pay will probably be well worth it, especially if you are a procrastinator, and the advisor can get you going with a workable financial plan.

Website Resources

there are literally tens of thousands of sites out there you can utilize. In early 2003, I did a search on Yahoo! using the key words "retirement calculator." I came up with a whopping 206,000 hits! Here are a handful of Websites with retirement calculators and useful worksheets that are more comprehensive, yet easy to use:

www.blackenterprise.com www.quicken.com www.kiplinger.com

From the book, Investing Success: How to Conquer 30 Costly Errors & Multiply Your Wealth! by Lynnette Khalfani [c] 2004. Reprinted by arrangements with the author.

Lynnette Khalfani is a frequent contributor to BLACK ENTERPRISE magazine. A former Wall Street Journal reporter for CNBC, she frequently appears on NBC's Today show.