How you decide to invest your money will play a significant role in not only your financial future, but that of your family. Therefore, every investment you make must be carefully thought out and scrutinized. While investing is far from an exact science, it is possible to make investments that have a better chance of paying off by using some common sense. Ideally, most people would love to have a successful investor like Glen Gonzalez to invest their money for them. However, it is possible for the average person to become good at investing. If you have some money and you are thinking about investing it in the near future, here are some easy investment tips that will help you to make a nice profit.
1. Diversify
Diversifying your investment portfolio is basically investing 101. It just makes good sense to never put all of your eggs in one basket, especially when it comes to investing. You must always remember that there is a certain amount of risk associated with investing. This risk will vary depending on what you are investing in. Even if a particular investment has been showing amazing growth and seems like a complete slam dunk, there is the possibility, however remote, that you could lose some or all of your money. Therefore, spread your money across a wide variety of asset classes. Bonds, emerging stock, small-cap stock and large-cap stock are all potential investment ideas that you should discuss with your financial advisor. Investing in this manner will protect you and help to minimize your risk. If you make an investment that underperforms or completely goes into the tank, you will have several other investments to pick up the slack.
2. Invest automatically
You may have heard your financial advisor mention something to you about dollar-cost averaging. This is a term that is used to describe a simple principle for investing that can be very beneficial to you. It basically means that you are investing a specified amount of cash on a monthly basis. These investments are made no matter what the current state of the stock market is. If you happen to currently be putting money into a 401k on a regular basis, this is an example of dollar-cost averaging. When you use this investing method, you will be able to purchase a greater amount of shares when the price goes down and a smaller amount of shares when price rises. Eventually, a lower price for each share should be the end result.
3. Don’t engage in too much trading
When investing in the stock market, many people tend to become involved in rapid-fire trading. This is not a good strategy and rarely provides the investor with a significant return. One of the reasons why people trade more than they did years ago is the fact that the cost of trading has gone down significantly. Commissions for under 10 dollars are not hard to find. However, investors should be aware of the many other costs that are commonly associated with trading. Increased taxes for short-term trades and commissions for trades under 10 dollars are examples of these added costs. Another reason why you should stay away from frequent trading is that you need to pay constant attention to the changes in stock prices if you are going to engage in this activity. If you have a full-time job, this will be impossible to accomplish.