If you are a new investor and looking for some tips and strategies you’re in luck because that’s exactly what our blog today is going to be focusing on. The fact is, as a new investor you definitely should be doing as much research as you can into how investing works as well as what all of the technical jargon actually means. The way we look at it, when it comes to protecting your money and using it to make more money, the more solid information you know the better. Enjoy.
First we’ve got 5 simple rules that used definitely should follow when investing in any volatile market. Over the last few years we’ve all seen that the investment market can change, sometimes literally overnight. The fact is however that there are a number of simple rules that the best investors have been using for a long time in order to build their long-term wealth.
- Stay calm and be patient. It’s best to never rush into any decision when it involves investments.
- Diversify your investments and your portfolio. Anyone that knows the ins and outs of investing will tell you that predicting what’s going to perform best in any year, or in any asset class, is particularly challenging. When you diversify your investments and invest in different asset classes you protect yourself from the risk of any one of those assets failing.
- Time and compound interest are your ally. Simply put, the longer you stay in the market and stay invested, the more powerful the effect of compound interest will be on your money. If you habitually enter and exit the market you’ll find that your investments typically won’t do nearly as well as those people that stay in the market over a long period of time.
- Review your investment strategies from time to time. As you get older and (hopefully) wiser your wealth should build and your financial situation should change. To keep up with these changes you’ll need to review and also change your investment strategies regularly.
- Don’t shy away from asking for advice from professionals. If you have a clearly defined strategy and set of goals, which a financial advisor can help you to set, you’ll be much more able to withstand any fluctuations in the market with your wealth and investments intact.
What exactly is dollar cost averaging? Well, that’s a darn good question and the answer is that dollar cost averaging is one of the most useful techniques available to help you avoid severe ups and/or downs in the market.
Unless you have a working crystal ball, predicting the best time to enter the market is practically impossible. For that reason it’s much better to spread out your investment dollars across a longer period of time rather than investing everything at one specific point in time. For example, if you have $10,000 to invest you’d be well advised to invest $500 a month over the next 20 months rather than investing $10,000 all at once today.
By doing this, you will average out your investment dollars and avoid the highs and lows of the market that can sometimes completely destroy any investments that you made at one specific time.
Compound interest is, as we have said many times, your ally. No matter who you are or how much money you have to invest, the sooner you start the better. That’s because compound interest is a very good way to grow your money and much more powerful in the long run. For young investors this may be the most important piece of advice that you’re ever going to hear. Simply put, the longer that you invest your money they have more positive effect that compound interest will have on it and the more money you’ll be able to make.
Saving and investing are definitely not the same. The difference is not subtle but many people believe that it is. Saving is when you put your money aside to use it in the future instead of using it to make purchases today. Investing, on the other hand, is using your money to make more money. While you certainly will get a very small amount of interest with any savings account, the fact is that the stock market, bonds, real estate and other investment asset classes, if used correctly and followed diligently, will make you much more money than basic interest on your savings account ever will.
Saving money = putting it aside for later. Investing money = using that money to grow your wealth and have more later.
Hopefully these tips and strategies have given you a better idea of how investing works, what you should be doing with your money as far as investing is concerned and also mistakes to avoid when investing. If you have any questions about investing in the stock market, financial topics in general or anything else that has to do with growing your money, please let us know and will get back to you with answers and options ASAP.