Investment Decisions

Personal Investment Management: How I Invest My Own Money

My clients always ask me how I invest my own money as if it’s a secret that I keep to myself. The thing about money management is that people often feel like no matter how much they learn about the latest techniques and trends, they’re never quite doing it right, that there’s always some better way to save or invest. 

Well, as a CERTIFIED FINANCIAL PLANNER™ professional who works with wealth management strategies every day, I’m here to tell you that the way I manage my own money is not all that different from how I manage my clients’ money. The first step is to start with the basics.

Basic Money Management &  Personal Investment Tips

Before developing and implementing an investment plan, it’s crucial to make sure all your other financial bases have been covered. Here are three tips to consider before we dive into my personal investment process.

1. Emergency Fund

One of the most important money management tips is to make sure you have an adequate emergency fund before investing. An emergency fund should consist of cash as well as access to capital and lines of credit.

It is used to cover unexpected expenses or disruptions in cash flow, so that you won’t have to steal from your investment portfolio in the event of an emergency. 

If you haven’t already, start saving a portion of your income in highly liquid investments (savings accounts, money market accounts, certificates of deposit, etc.). Ideally, you should have 3-6 months’ worth of non-discretionary expenses saved before moving onto investment goals.

2. Net Cash Flow

After you’ve built an adequate emergency fund, it’s time to look at your net cash flow (income minus expenses). Since investments are just one component of a larger financial plan, this step is very important. It is your net cash flow that will act as the funding mechanism for your investment plan.

For instance, if you are consistently spending more than you earn (deficit), there will be no extra funds to contribute to your portfolio. Consistent negative cash flows actually indicate a larger issue that will need to be addressed before a successful investment plan can be established. 

Similarly, a net cash flow of zero (spending as much as you earn) doesn’t allow for any leftover funds to be contributed to investments. It may not indicate systemic issues like a negative cash flow, but it does indicate that spending will need to be adjusted to meet investment goals.

A positive cash flow (surplus) is ideal when assessing how to fund an investment plan. To generate a surplus cash flow, you must spend less money than you earn. This can be accomplished through techniques such as budgeting and tracking expenses.

3. Don’t Time the Markets

Avoiding market timing is a money management technique that can improve your returns over time. You may have heard the saying “buy low, sell high,” but the fact of the matter is that trying to determine when an asset has reached its high or low is like trying to guess the winning lottery numbers: more often than not, it doesn’t work. 

There is no way to predict short-term fluctuations with enough accuracy that you can consistently make the right decision about when to buy and when to sell. Staying in the market, even through volatile times, is a much better choice when trying to build long-term wealth.

Historically, although it has had many ups and downs, the market has always rebounded over time. That’s why it’s so important to trust the market and avoid temptations to time it, instead letting time be your ally when growing your investments. 

Personal Investment Policy

As a duty-bound fiduciary to my clients, I strive to handle their money as if it were my own, which is why the steps I take in my personal management and investment process mirror those I take with my clients. My personal investment policy involves several key points, including:

Active vs. Passive Investing

One of the most important aspects of my personal investment plan is the distinction between active and passive investing. At Ferguson Johnson Wealth Management, we focus on passive investing.

Though there is no guarantee that one strategy will outperform another, passive management techniques have generally outperformed active management over the long term. 

Passive investing utilizes strategies like buy-and-hold or indexing, while active investing involves single-stock investing and frequent buying and selling in an attempt to beat the average returns of the market.

As expected, active management comes with added expenses and no guarantees that the returns will be any better than a passively invested portfolio. In fact, active investing often results in worse returns when the increased costs are factored in. 

Trying to pick and choose individual stocks has proven to be a losing game many times, and it’s something I try to avoid in both my own portfolio as well as my clients’.


Next, diversification is a critical piece of any investment plan. It can be achieved through an asset allocation strategy that considers which components of your plan can move together and which can act as a hedge against downside risk.

Diversification can’t guarantee a minimum level of return, but it will at least act as a buffer against the inherent volatility of the market. By investing across and within several different asset classes, you can reduce your overall exposure to risk. 

While it can be tempting to chase performance and overload a portfolio with the hottest asset class, I prefer to take a more balanced (and diversified) approach when investing my own money. This mindset aligns with how we manage our clients’ funds at Ferguson Johnson Wealth Management. Our portfolio options include diversified allocations in:

  1. Large-cap growth
  2. Large-cap value
  3. Mid-cap 
  4. Small-cap
  5. Diversified international
  6. Emerging market
  7. Fixed income
  8. Real estate through low-cost index funds

This provides broad exposure to several different industries, sectors, and asset classes across the market, ensuring that no single investment can drastically alter the returns of the whole portfolio. I personally focus on exchange-traded funds (ETFs) and mutual funds as a convenient way to increase diversification in my investment portfolio.

Not All Bonds Are Created Equal

Another important investment consideration is understanding the current bond environment and how to avoid exposing yourself to too much risk. Clients often don’t realize that traditional “safe” investments like bonds no longer provide the guarantees they used to 40 years ago.

In 1982, you could achieve an average yield of 13.01% with a relatively low-risk investment in long-term bonds, but that is no longer the case. As of July 7, 2022, the yield on a 10-year bond is only about 3.01%! 

Given the interest-rate environment we find ourselves in, not all bonds are created equal. The Federal Reserve has already raised interest rates three times and they are very likely to continue raising rates throughout the rest of 2022.

Because of this, we believe that short-term bond funds are a much better choice for the fixed-income portion of an investment portfolio as opposed to longer-term bonds. 

This is because interest rates are inversely related to bond prices, and the longer the bond’s maturity, the more intense this relationship is. So longer-term bonds will likely lose their value much more quickly and intensely as interest rates continue to rise.

Paying attention to the duration of a fixed-income investment has never been more important than it is in today’s investment environment. As a firm, we have targeted shorter-duration bonds over the last 8-10 years in order to alleviate this issue.

How We Can Help

Successful money management and investing don’t have to be shrouded in mystery. Our goal at Ferguson Johnson Wealth Management is to give our clients the tools and resources to feel confident in their financial plans. If you’d like to learn more about our investment philosophy and how it applies to your portfolio, reach out to us at 301-670-0994 or by email.