The Dos & Don’ts of Investing
Many believe that financial advisors are only for those with lots of money to invest. The truth is that working with an advisor is a great choice for anyone that wants to get their finances on track and set goals for their future. Finances affect almost every aspect of our lives, having someone who can guide you along the way and provide sound advice can not only have an impact on your own financial well-being, but also on the lives and futures of the ones you love.
When it comes to investing, there are many options and strategies out there. However, many of us find the process confusing, which makes knowing what to do even harder.
Regardless of your investment goals, here are some basic Dos and Don’ts when it comes to investing.
DO start early – the earlier the better! Even if you don’t have much to invest. The sooner you start, the longer you will have to put money away and allow it to grow.
DO invest only what you can afford. You must consider your necessary living expenses before investing. Create a Spending & Savings Plan to get a good idea of what you have available to invest.
DO assess your risk tolerance. Knowing how much risk you are willing to take with your hard-earned money before investing is very important.
DO educate yourself. It’s always a good idea to further your knowledge. Especially, when it comes to understanding what is going on with your money. Research how different investment vehicles work, the risk associated with each, and how changes in the market or government regulations can affect them.
DO diversify. There’s an old saying about not keeping all your eggs in one basket. Well, the same goes when it comes to money - you shouldn’t put all your funds into one type of investment. Different investments have different risks associated with them, so it’s best to have a combination of investment vehicles in order to reduce your risk of loss.
DO seek expert advice. Having an expert that will guide you along the way can help you develop better and smarter investment strategies that work for your personal situation. Check out our tips on choosing an investment advisor.
Now that you know what you should be doing – let’s take a look at a few things you shouldn’t be doing when investing.
DON’T have unrealistic expectations. This is very important when choosing investments. Unrealistic expectations can limit your ability to make sound decisions. Expecting returns that are too high can lead to disappointment and discourage future investments. It’s best to do your homework and understand how market conditions change and how those changes can affect returns. When investing, always remember that past performance does not guarantee future results.
DON’T follow the crowd and invest in something just because your friends are. Just because others are doing it doesn’t always mean you should, too. People often blindly follow along with others due to fear of missing out. You should stick to your plans and only invest when it’s the right fit for you.
DON’T over trade. Repeatedly buying and selling or changing investment vehicles can become costly. Brokers charge a fee each time they make a trade for you. Paying fees constantly will eat into your investments and ultimately limit your returns in the end.
DON’T take unnecessary risks. Investing all your money in one product that may be “hot” at the moment and promising great returns is never a wise choice. Although a big payout sounds good, it could also be a big loss. It’s always best to diversify and balance your risk.
DON’T treat investing like gambling. It’s simply not the same and should not be treated as if it is. You shouldn’t expect to receive a large payout quickly. Growth takes time.
DON’T get emotional. Many things affect our choices, especially when investing. Making decisions based upon your immediate emotions can lead you to make the wrong decision out of anxiety and fear. Do your best to keep your emotions in check and make decisions after thinking it through.
DON’T get scammed. Investment fraud is prevalent these days, especially on the internet and social media. Although there is beneficial information to be found online, there are equally as many scammers that are just trying to steal your money as well - so many that we’ve put together a list of tips that can help you avoid investment scams on the internet. Make it a priority to know the signs and protect yourself.
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