Chapter 3: THE DOS AND DON’TS OF INVESTING

THE DOS AND DON’TS OF INVESTING

If you’ve ever been curious about investing and didn’t know where to start, you’ve likely pondered a variety of questions from what types of stocks to buy to how much money to invest to who to ask to guide you along the way.

Though it may seem complicated, investing doesn’t have to be difficult at all. Investing your money is critical to reaching your savings goals. With an experienced and trusted financial advisor by your side, investing can be an exciting and smooth process. To help give you some confidence when it comes to investing, here are our team’s suggested do’s and don’ts for investing beginners.

WHEN IT COMES TO INVESTING, DO…

1. EDUCATE YOURSELF.

You won’t likely make money from stocks if you don’t take the time to research a company before investing. Study a company’s core values, financial statements, and management, as well as any other beneficial information that gives insight into its investment potential. Even more, don’t go it alone. Choose a financial advisor to guide you in the process, and also make sure he or she has adequate experience and knowledge about investing.

2. DIVERSIFY YOUR PORTFOLIO.

New investors might be surprised to know that it’s better to own more investments than less. A diversified portfolio should not only be varied in its number of investments but also in types of investments. In the event that one or two of your stocks begin performing poorly, it may not affect your entire portfolio greatly. This is just one reason why your stock portfolio should be sufficiently diversified.

3. INVEST FOR THE LONG-TERM.

It’s true that many investors who have become wealthy from stocks are long-term investors. Long-term investing is more stress-free and gives investments time to make a greater impact. Investing for the long-term can help you avoid paying numerous fees to your broker for opening numerous trades. Also, thanks to compound interest, you can earn more over the life of your investments by investing less now than a larger amount later.

DON’T DO THESE THINGS WHEN INVESTING…

1. LET YOUR EMOTIONS TAKE THE LEAD.

Since your money is at stake, investing has been known to affect your emotional well-being. That’s why it’s important to keep a level head when investing, as emotions can cloud your judgement. It’s best to only invest when you are sure it is the right thing to do and have an exit strategy in mind.

2. INVEST BLINDLY.

Once you begin the investing process, you’ll likely get unsolicited advice from stock trading sources. However, you should never invest blindly on free tips or recommendations, even if they do sound appealing. Trust your advisor to guide you in the right direction when it comes to investing decisions.

3. TAKE UNNECESSARY RISKS.

While investing in stocks, you should never take unnecessary risks, as your risk reward should always be balanced. A good advisor will tell you that it’s never a good move to invest all your money in a hot stock to get a slightly higher return. On the contrary, safeguarding your money is just as important as getting high returns.