Back to the Basics: Investing 101
If you’re not well-versed in the basics of the stock market, the words and numbers spewed from CNBC or the markets section of your favorite newspaper can border on gibberish.
I believe there are seven investing principles that can help you reach your long-term goals. Understand these, and you'll be off to a great start.
1. Establish a financial plan based on your goals.
- Be realistic about your goals.
- Review your plan at least annually.
- Make changes as your life circumstances change.
2. Start saving and investing today.
- Maximize what you can afford to invest.
- Start early—length of time in the market is key.
- Don't try to time the markets—it's nearly impossible.
3. Build a diversified portfolio based on your risk tolerance.
- Know your comfort level with temporary losses.
- Understand that asset classes behave differently.
- Don't chase past performance.
4. Minimize fees and taxes.
- Markets are uncertain; fees are certain.
- Pay attention to net returns.
- Minimize taxes to maximize returns.
5. Build in protection against significant losses.
- Modest temporary losses are okay, but recovery from significant losses can take years.
- Use cash investments and bonds for diversification.
6. Rebalance your portfolio regularly.
- Be disciplined about your tolerance for risk.
- Stay engaged with your investments.
- Understand that asset classes behave differently.
7. Ignore the noise.
- The press makes noise to sell advertising.
- Markets fluctuate.
- Stay focused on your plan.
If you don’t yet have a financial plan, give us a call. We’d be honored to help you help you look beyond short-term temptations in pursuit of your long-term goals.
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