7 Rules of Investing
February 26th, 2020
Investing can seem intimidating and overwhelming. But you don’t have to just cross your fingers and hope for the best.
1. MANAGE YOUR EMOTIONS
Behavior is a major factor in investment success. By being aware of your emotions and knowing your behavioral pitfalls, you can avoid many investment mistakes caused by panic. Finances are an integral part of our lives and it’s difficult to separate them from our emotions, but your nest egg will thank you if you can learn to take your time when making decisions and stay strong and committed when the market feels like a roller coaster.
2. STAY AWAY FROM MARKET FORTUNE-TELLERS
Wouldn’t it be wonderful to have a crystal ball to predict where the markets will go or what the economy will do? Unfortunately, it’s not that simple. Don’t worry about what you can’t control, but channel that energy into focusing on the factors you can impact, such as the types of companies or funds you invest in and how much you save. On that same token, don’t make your investment decisions only based on past performance. Just because a mutual fund blew everyone away last year doesn’t mean it will thrive this year.
3. DEVELOP A LONG-TERM PERSPECTIVE
You may want to check financial tasks off your to-do list in a hurry, but remember, investing isn’t a race. It will take time for you to reach your goals, and if you go in with that mindset, you’ll likely see more growth and celebrate the small victories along the way.
4. CONTROL WHAT YOU CAN
It’ll be easier to stay committed to your long-term plan if you control what you can and let go of the rest. That’s why it’s important to clarify your goals, needs, and time horizon and design a plan tailored to your unique situation. Having an investment philosophy and strategy will give you purpose when hard times come. Your reason for investing could be to save for retirement, put aside money for college tuition, or save for a down payment on a home. Knowing your purpose makes the journey more meaningful.
5. AVOID UNNECESSARY RISK
All investing involves risk, but that doesn’t mean you just cross your fingers and hope for the best. The level of risk you take should correspond to your age, time horizon, and goals. Your portfolio isn’t the place for speculation or bets, and your plan should reflect your risk tolerance.
6. START ASAP
Since investing is a marathon, time is on your side. The longer you allow your money to sit in an investment account, the more time you’ll have to reap the benefits of compound interest. Don’t save investing for the future when you feel more prepared. Each year you wait means you’ll need to save more in a shorter amount of time.
7. DIVERSIFY YOUR INVESTMENTS
It’s drilled into us pretty regularly that we need to diversify our portfolios. Since investing is never a guarantee, you want to invest in various formats and companies to reduce your risk of loss. That way, if a company goes down or an industry tanks, you don’t lose all your money at once.
RULES TO INVEST BY
Investing doesn’t have to be complicated, and it doesn’t have to scare you. If you want to pursue a better investment experience and implement these tips into your investment strategy as you pursue a secure financial future, I would love to help.
Shore Financial is a fee-only, tax-focused financial planning firm located in Monmouth Beach, NJ.
Joseph Vecchio CPA, CFP®, MBA is the firm’s President and has dedicated his professional life to the finance and accounting professions.
Joe believes that people are being exploited by financial salespeople who are merely motivated by quotas, product sales and commission-based income! Shore Financial Planning was founded to provide peace of mind through conflict-free, value-added advice.
When you work with Shore Financial Planning, the financial advice we provide is ALWAYS in your best interest.
As a Certified Financial Advisor, NAPFA Professional, and Fiduciary Advisor, Joseph Vecchio offers unbiased and conflict-free financial advice & retirement planning services.