Investing, whether it’s a significant part of your current income, a side hobby or part of your retirement plan, can be a complicated process. There are countless options for investing: stocks, bonds and materials just to name a few. It seems there are even more methods and strategies about investing. If you’re just starting out investing or even if you have some experience, there is always something new to learn. Here are a few tips to help you survive the complicated investment world.
Not only should your portfolio show diversity in the companies and stocks themselves, but you should invest in several entirely different sectors as well. This is an important strategy for every investor. If you have all your money in a single company or industry sector, it won’t be good if that sector tanks. Diversification is a good strategy for every investor.
It’s important to research more than just the stocks themselves. Look into the companies, their management and business plans. The more you know about companies in which you are invested, the better you can make decisions about when to buy or sell certain stocks.
While the stock market can offer the potential for high gains, there is also risk involved. If the market is too risky for your current circumstances or you’re unsure about the future, consider moving some of your investments to cash. Just remember, you won’t earn as much investing in cash, but you might sleep better at night.
4. Don’t Be Emotional
It’s important to remember that investing is a business, and there isn’t a lot of room for emotion-based decisions. You should decide on investments and strategies based on the financially-relevant information, not on sentimentality or emotional connection to certain industries or companies.
5. Find a Professional Partner
While there can be benefits to doing your own research and charting your own investment course, sometimes it’s wise to get help from a professional. A certified financial advisor can help you learn more about investment options so you choose the ones that work well for your unique situation.
6. See Beyond the Hype
With all the investment information on television and the internet, it can be difficult to differentiate impartial information from biased opinions and advertising. Rather than spending your time reading and listening to various media outlets, it can be wise to invest time in personally researching the areas in which you are invested.
7. Keep it Simple
It can be tempting to always go after the next new thing and or diversify excessively, but it’s important to only do as much as you can control. If you invest in so many companies that you can’t research and keep up with each one’s current operation, it may be best to pull back. Likewise, don’t adopt a complex investment strategy, or one that involves trading at an excessive frequency, simply because it’s currently popular. In many cases, simple and straightforward is best.
8. Go Against the Crowd
Sometimes conventional wisdom is anything but that. There can be a lot of value in not following the popular investment choices. However, making all your investment decisions as the opposite of the crowd can also be unwise. Learning how to make decisions based on the merit of the investment rather than its popularity is a useful skill. Books such as Fisher Investments Beat the Crowd can help you learn how to see through the veil of popularity to the real merits of any investment opportunity.
9. Have a Safety Net
Regardless of which investment strategies you choose, it’s important to have a backup financial plan. Don’t put all your eggs in one basket, as the saying goes. Make sure you are covered if some investments don’t pan out or if the market falls for a significant amount of time. It’s usually smart to have a mix of high risk/high reward options, and also low gain/high stability choices.
Investing can be a complicated thing but there is great potential for reward if it’s done wisely. It can take a while to learn which strategies work well for your particular situation and which are better left alone. Hiring a financial advisor can help you sort out all the available options and learn which ones may be beneficial for your situation. Books, blogs and other research options can really help you learn about the opportunities and how to judge them on their merits. Choose investments based on your own situation rather than popularity or advice from various media outlets.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.