5 Rules for Successful Investing
1. Live beneath your means
Like most good ideas, it sounds simple, but it’s hard to do. But the bare fact is that unless you spend less than you make, you won’t have anything to invest. Decide how much you’re going to invest before deciding how much you’re going to spend (i.e., pay yourself first)
2. Know Yourself
Some people can shrug off investment losses. Others second-guess themselves and spend needless time worrying about the future. Trying to fight your true self only brings frustration when it comes to investing. A good advisor can help you determine style and stick to it
3. Stay Invested
It’s very difficult to predict market ups and downs consistently enough to make jumping in and out a winning strategy. Many studies have shown that holding a low-cost mutual fund that tracks an index will outperform investors jumping in an out of the market. Due to the magic of compounding, time “in the market” is much more important that “timing the market”
4. Diversify
We can’t predict with certainty which way markets will move. But you can lessen your risk by spreading your assets among a variety of investment types. That way, when some types of investments are struggling, others can help carry the load. This keeps you in game longer by leveling out the ups and downs… remember, time in the market trumps timing the market
5. Pay Attention to Taxes
After investment costs and inflation, taxes take the biggest bite our of your returns. In fact, it can be more important to have the right type of account than it is to pick exactly the right investment