If you’re keen on taking advantage of the power of compound interest is no better way to do it than investing your money and creating a diversified portfolio for yourself. Investing in the stock market, in bonds and even overseas means that your money will have a much better chance to appreciate, using compound interest to increase the value of your investment and pay you back better than any savings account could ever hope to.
If you’re a new investor there are many things that you’re going to need to do and to learn. Like any skill learning how to invest takes time, patience and common sense. You’ll need to know things like how much money you can afford to lose and you’ll need to make important decisions about the timing and length of your investments. Of course there are quite a few other tasks that you’ll need to accomplish and, to help you with those tasks, we put together a blog with 10 tips that you can use to get started. Follow them and you should be well on your way to putting together a nicely diversified portfolio that, with a little TLC, should pay off nicely some day in the future. Enjoy.
- Diversification is incredibly vital to the health of any portfolio. With a diversified portfolio are basically spreading your investment money around in order to protect it. The simple fact is that not every investing choices that you make is going to be a good choice and not every investment is going to pay off. By investing in several different areas, like bonds, stocks and so forth, even if one of your decisions turns out to be a bad one or a particular stock takes a nosedive it won’t affect the rest of your portfolio.
- Two words – Due diligence. Just like any other investment, whether it’s a new house, equipment for your business or what have you, you need to do your research, ask questions and get as much information about any company that you’re thinking about investing in or any stocks that you’re considering purchasing. The more research and time you put into it the better your short and long-term results will be.
- Set goals and limits for buying and selling based on market analysis. If you know ahead of time what a selling price would need to be in order for you to sell or where a stock or bond price would need to be in order for you to buy it you’ll be better equipped to make fast decisions as well as educated and intelligent decisions rather than just buying and selling on a whim.
- Only invest money that, if you lost it tomorrow, what in destroying you financially. The less money that you have for investing the more cautious that you should be in your choice of investments because, as you might already know, there’s no such thing as a guaranteed return. If losing everything would put you in the poor house you best not to risk everything.
- Check your greed at the door because, in many cases, it is the one deadly sin that really can be deadly for your financial situation. If you’re working with a broker make sure that they understand your goals as well as your limits and never expect that anything that they’re going to recommend is going to increase greatly value very fast. On the other hand if you happen to have a stock or any other investment that suddenly increases in value considerably, say anywhere from 40% or higher, you should definitely consider selling.
- Take short-term large gains when you get them (which will not be often) but plan on keeping anything that you invest in for a long time. Simply put, stock prices have a tendency to fluctuate wildly in the short term but generally speaking increase in value in the long term. Again what you want to take advantage of here is the power of compound interest and keep in mind that historically the stock market has had a positive return of about 10% since the 50s. If you’re looking for huge short-term gains you probably be better off playing the lottery.
- Just like impulse buying can be bad for your budget buying stocks or bonds or any investment on impulse is not a great idea. As for buying a stock based on rumors or conjecture, we hope we don’t have to remind you that this is a fool’s errand that will generally burn you about 90% of the time.
- Look for undervalued stocks as well as bonds from companies that, at least for the moment, have fallen out of favor with investors. As long as the company has a sound history (and their stocks or bonds are selling at a steep discount) you should be able to get great value for your money if you hold onto the stocks or bonds for the long-term.
- Be aware of the tax implications of all of your investing habits and don’t be afraid to ask for advice if you don’t have the answer or don’t have the information that you need.
- There are discount brokers online that will charge you next to nothing to make trades. If you are new to the game you might still consider getting some professional help as you’re getting started. Just like anything, once you’ve had some practice and seen what your broker does you can start emulating them, doing research yourself and in time switch to an online broker that charges you much less for their services.
Some of these tips are probably not new to you but, on the other hand, some of them might have opened your eyes to a few interesting realities. Whatever the case we hope that you enjoy this blog and got something valuable out of it. Please make sure to come back and join us again sometime soon for more tips and advice on all sorts of interesting subjects. See you then.