I get approached almost daily with questions about the market in general or stocks in particular. “Should I buy Facebook?” “Do you think the market will be up this year?” “Will Bank of America go bankrupt?” I am asked the whole gamut of questions, and indeed there are very few I have not heard over the years.

But this week I got a doozy: “How would you define investing to an 11 year old?” To answer, I started babbling about ‘capital allocation’ and ‘risk adjusted returns’ and the like, but then realized that unless this 11-year-old was named Warren Jr., he probably was not going to understand that definition. With this desperate mom pressing me for a better explanation for her son, I came up with the following: “Investing is putting something aside today so that you can have even something better in the future.”

And that just about sums it up: take something today - be it time, money (the usual suspect), etc. – so that ‘tomorrow’ (the proverbial tomorrow, that is, because by its nature investing is long-term) you may have something that is even better than what you started with.

But people tend to overcomplicate the investing process and as a result, make mistakes that shrink, rather than expand, their wallet. As a starting point, investors must realize that investing is just a means to an end. You don’t (or shouldn’t, unless it is your livelihood) invest just for the sake of it; every investment serves a specific purpose. To buy a home in five years, to be able to retire comfortably in 20 years- the list of reasons goes on and on. Thus, before a dollar is put into the stock market, a specific goal and plan need to be put in place. Absent a road map, you will likely end up just about anywhere, and usually that place is poorer than when you started. So whether it is on your own, or in conjunction with a professional, think about your goals, contemplate what ‘better something’ this money is going to be used for. Set forth a plan.

As a professional investor, if I could attain only one piece of information from a client, it would not be along the lines of “what is your risk tolerance?” or other such subjective factors that often (erroneously) drive the investment process. Rather it would be, “When do you need the money back?” Translation: what is your time horizon? If it is next week, then the plan is simple – keep the money safely in cash in a good bank. If it is 20 years from now, then sitting in cash is the riskiest place your money can be. Instead it should be invested in a broad basket of equities.

Too many investors have the IQ of a doctor when it comes to their chosen profession but the smarts of a 4^th grader when it comes to their money. Take the time to think through a plan so that the process of investing can work for you and not against you.

(The information in this article is strictly for educational and illustrative purposes and is not an attempt to furnish personalized investment advice or services.)