Investing Wisdom for the Investor At Any Level
Except for lions, burglars, dodgy shellfish, rickety bridges, heights, hungry lions and algebra, nothing is more naturally terrifying than the world of investing. It just seems so complicated, like something you can only get into if you’re a part of MENSA or if you once worked for NASA.
This is a contributed post and do not necessarily reflect the opinions of Meet The Harris Family.
But what if this perception is all a facade?
Mmm hmmm. A smoke and mirrors trick, whether done on purpose or not. If you don’t know what we are talking about, we’re talking about there being some simple steps to help you make wiser investments and without suffering from a four-day migraine as a result.
Of course, we can’t lay claim to these bits of advice ourselves. Instead, we need to admit that we’ve pickpocketed these ideas from genuine investors and those that know all there is to know about investing. Nonetheless, you’re about to see the impenetrable wall around investing crumble and the drawbridge lower to let you in.
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Build A Better Foundation
For those that know nothing about investing, the default move is to stash any surplus cash into a savings account at the bank. But this 1% interest is hardly going to make a difference, even over the course of a lifetime. Now compare that to the pretty typical 7% you can make from investing in stocks and diversifying your portfolio so no one mistake can financially ruin you. However, before you start worrying about diversification and all that, there are some other investments we recommend. These include paying off your debts, setting aside your savings and, most importantly, use your employer match scheme with a 401K because getting free money is a good investment.
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Goals Are A Great Incentive
You’ve probably been thinking you need a lot of money in order to start investing, but it’s the other way around. Investing can make you a lot of money. The trick is having a goal in mind and a time frame for it so that you can tie the type of investment to a term. That could be owning a second home, retiring early, going traveling for a year, anything.
Once you have a goal in mind, we always recommend you speak to a professional service like CMC Markets so that you can understand what the best options are for you. If it’s a short-term goal, that could be CDs or money market accounts or more conservative bonds, whereas long-term goals would be stocks. Like we said, speaking to an investment professional is always the best way to go when it comes to matching up the type of investment with the time frame in mind.
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Know Your Own Definition of Risk
Almost everyone knows that investing comes with a degree of risk, but not a lot of people understand what the risks are. Sure, the overarching one is money, but it’s not only time that accompanies this. In fact, one of the biggest risks is more to do with your emotional capacity. It’s about knowing how you will react to a movement in your investment. For example, if seeing your stock’s value sink – even temporarily – will make your heart stop, then maybe you should invest in something more conservative. That could be a mutual fund or an exchange-traded fund or something like that, something that aligns more closely with your risk tolerance levels and your time frame.