Investing Your Money Basics – 10 Tips
Stocks Outperform All Other Investments
While this is absolutely true, it is also true that realizing these returns is seldom a simple matter.
Stocks Are Very Risky
Investing in stocks is a very exciting proposition, it is also a very risky one. Trading stocks without understanding them will likely cause you to lose a lot of money.
With Great Risk Comes Great (Potential) Reward
Risk is not always bad. The savvy investor will manage risk in order to maximize their return on investment.
Pay Attention to Earnings
Nothing can affect a stock price more than earnings. If you pay attention to nothing else, always pay attention to earnings and the stocks P/E if it pays dividends.
Bonds Are Your Safety Net
Bonds aren’t sexy like stocks but the provide a consistent means to collect passive income, and then get your initial investment back
Inflation Can Hurt Your Investments
If you get too conservative with your portfolio you can end up with returns that don’t even keep up with inflation. To be successful investors need to ensure their portfolio well outpaces inflation.
Always Buy U.S. Treasury Bonds
Nothing is a sure thing in investing, but United States Treasury Bonds are about as close as you can get to a sure bet. The savvy investor will always keep some United States Treasury Bonds in their portfolio.
Diversify Your Portfolio
An overly aggressive portfolio will be very risky and could wipe out your investments. On the other hand an overly conservative portfolio may not even keep up with inflation. The best portfolios are diversified to mitigate risk while still allowing growth that outpaces inflation.
Consider (Index) Mutual Funds
Interest Rates Can Hurt Your Bonds
If you’re trading bonds, as opposed to buying and holding them, then a rise in interest rate will cause bond buyers to shy away from your low paying bonds.