Investing 101: Top 5 Investing Rules You Should Know

by Guest on July 24, 2013

When it comes to investing your money for the future, many questions arise. Where do I invest my hard-earned money? How should I go about saving for my retirement or my children’s education? If you follow a few simple steps, you’ll find the answers to these questions and more.  So, make goals for yourself and watch the money roll-in.

1. Make a Plan/Set Goals

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Image via Flickr by 401(K) 2013

Making a plan before you start investing is a great way to pinpoint exactly what you wish to achieve. If you’re planning for your kids’ future or your own, it’s important to know where you presently stand. Make sure to calculate your debts, assets, and savings to see what you have available to invest. From the information you gather, you should give yourself a decent idea of where to invest.

2. Invest Sooner Rather Than Later

The sooner you invest your money in securities with a decent rate of return, the more money you’ll end up with in the long run. It seems simple enough. So, don’t delay. If you invested $5 a week at 8% interest from age 20 to age 60, you’d have $76,000 saved. If you waited till you were 40 to save, you’d need to invest $29 a week until age 60 to equal the same amount. If you don’t know where to invest, try reading some articles by Pete Lionel Briger, who has a proven track record in investment success.

3. Diversify Your Portfolio

As with anything else in life, it’s important not to put all your eggs in one basket. The best way to maximize your return and avoid unnecessary risk is to divvy up your investable income into investments of varying length, interest rate, and risk. Typically, you’ll find that the riskier an investment is, the higher the interest rate. Splitting your money up between low-risk, low-return bonds or T-bills and high-risk, high-return stocks or mutual funds keeps you from losing too much money and sets you up for success.

4. Self-Management or Financial Planner

Perhaps the most important question you’ll have when investing is whether to do the investments yourself, or find someone else to do the tough work for you. In the long run, doing all the work (researching, monitoring, buying/selling) yourself will save you a bit of money. You can avoid funds that have fees and a “percentage of account” fee. However, if you really don’t trust yourself, a financial planner might be the right choice. Be sure to pick one with references and one you trust.

5. Don’t Overcompensate

Overcompensation is a problem that plagues many new investors. As you may know, the market is constantly fluctuating up and down. Avoid the urge to invest in overly risky securities when the market is up, and don’t pull all your money out if the economy suddenly goes down a bit. Patience is the key to sound investing.

No matter what your financial situation, it’s important to start investing as soon as possible for the sake of your family and yourself. If you’ve ever had the dream of living comfortably and going on vacations once you retire, the sooner you start into investing, the easier it will be to turn dreams into reality.

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