Last week I mentioned that taking risks can pay off when it comes to investing, especially when you’re young. Time can smooth out volatility and gives you a chance to adjust your investment strategy if its not working. However, just as important as taking smart risks is knowing when not to take them.
You’ve earned your money so take the time to avoid losing it over bad investments and schemes.
For most people, investing in the stock market is a solution for a long term goal. The fluctuation of the market smooths out when looking at the big picture. Historically the stock market has had average returns of about 11%. When you factor in the powers of compound interest and regular contributions, they can be enough to help people meet their retirement goals.
However too many people confuse investing with gambling. They get into day trading because they think they can make money easily. They buy these package and follow systems, trading constantly, hoping for a big win.
Anytime someone tries to sell you on a get rich scheme with investing, you have to ask yourself if they make money from you signing up from the course or system. Ask for references from previous customers to see how they are doing, don’t just fall for the testimonials from their site’s landing page.
If you have tried the get rich quick route and haven’t seen results, knowing when it’s time to quit can protect your finances. You can redirect your resources towards another strategy.
Invest Your Money
Keep to your investment strategy and ignore the distractions. If you’re look for basic investing advice to serve as guidelines are a few to seriously consider:
- Buy Low and Sell High – Don’t let investing become emotional. Sell and buy based on what’s smart, not according to your friend’s prediction.
- Invest for the Long Term – Don’t waste your time trying to chase the latest hot stock. Consider using low cost index funds as the foundation of your retirement portfolio.
- Choose Investments that Reflect Your Goals – If you have a low risk tolerance, then don’t put all of your investment eggs into international small caps. You want to be able to sleep at night, so choose your allocation accordingly.
As you build your investment knowledge and you get more comfortable with it, you’ll see it pay off. Those that don’t get caught up in the hype tend to do much better than those that panic.
Thoughts on Investing
The good news is even if you start of contributing small amounts, with some time you’ll build your net worth and investments. Having a system and sticking to it can do wonders for your accounts’ balances. How many of you are investing (not just for retirement)? What’s your investment strategy? If you’re just getting started, don’t forget to check out my previous posts:
- Investing Basics- Get Started!
- What’s Your Investment Strategy?
- What are Some Investing Risks Worth Taking?
Photo Credit: wsilver