Whether you are a seasoned investor or just starting out, there is no “easy switch” to make investing less of a challenge. Due to the volatility of the market place your hard earned money can disappear in the blink of an eye. While certain sectors are improving, the economy is still sluggish, despite slight signs of rebound. Yet, for anyone to have any semblance of longevity in the stock market, you have to play your cards right and protect your investments anyway you can.
Here are 5 tips for protecting your investments:
You never want to take irrational steps to withdraw all your money each time you see the market temporally take a dip. This is one of the biggest ways to lose money. It is recommended that you let your money “weather” the storm. Even if the stock market hits a record low, soon enough the high tide will come back in and you’ll be back on top. In the long run, letting your investments ride the multiple, daily waves of the stock market will have bigger returns in the long run.
Another important way to protect your investments is to find the lowest risk possible so that you aren’t left paying high taxes on possible losses. This might sound confusing, but one of the biggest mistakes newbie investors make is not considering the value of their returns after taxes. Depending on the sector you have invested in, what can look like a positive or winning reward on paper won’t look so great after the IRS takes a big chunk.
If you are trying to diversify your funds and your money manager recommends an obscure investment, it is highly recommended that if you don’t understand or trust it, that you shouldn’t put any money into it. The marketplace can be complicated and you don’t need to complicate it even more.
If you are a new investor, it is also wise that you are extremely careful and prudent when taking risks, like investing in penny stocks or futures. Many of those investments have an extremely high risk factor and require a lot of initial money to even start trading. In addition, the returns, if you are not experienced enough, can be poor to modest at best. As a new investor, you should have a list of the riskiest stocks and not go near them until you have enough knowledge (and money) to play the game.
Lastly, a great way to protect your investments is to hire a good money management firm, a great accountant and an even better lawyer. The more wealth you accrue the more issues you will find yourself trying to get out of. If your investments become too big to handle, it can be important to maintain your wealth by having a team by your side to protect your financial well being. A good financial management team will protect you against lawsuits, help you broker deals and even make you more wealthy.
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