Thanks to my good friend TK from Blonde & Balanced for this guest post. I’m heading out on vacation with my son, and I’m grateful for the help with posts on my site.
Investing isn’t easy. If putting your money into the stock market equaled making a quick buck then everyone would be doing it and no one would ever lose their hard earned money. Unfortunately, that’s just not the way it works. The market fluctuates and it’s also saturated with different investment options. Whether you’re a rookie or a seasoned player investing can be overwhelming.
I wish there was a single stock market tip that I could give to you to tell you how to make money investing, but if that were true then we’d all be rich. Instead, let me give you a few easy pieces of advice to help you achieve your investment goals.
Start investing early
If you’re good at saving, but haven’t started investing yet then get to it. There’s no time like the present to start investing in the stock market. Setting a portion of your income aside for savings is a great first step towards building your financial future, but saving cash won’t help your money grow over time. That’s where investing comes in.
Avoid your eggs in the same basket
One of the worst investment mistakes people can make – and trust me as a financial planner I’ve seen a lot – is buying into the stock market on one single day.
Buying in consistently over time through automatic contributions helps buy into the market at both high and low prices which thanks to something called dollar cost averaging helps lower your overall investment purchase price.
Trying to time the market and buy in on the absolute lowest day of the year is a bad strategy, not to mention it doesn’t’ work because no one knows when the lowest day of the year is going to be.
Diversify, diversify, diversify
Another investment mistake that both first time investors and experienced investors make is putting all of their money into the same investment. I think the rationale is if it works then you need to buy more. Unfortunately that’s bad advice. If you purchased an investment on February 1 and it’s making money today there’s no need to buy more right now because the price is high. In the market you want to buy low and sell high, don’t buy in when the price is high because you won’t make as much.
Buying a mixture of income, equity, domestic and foreign investments helps diversify your portfolio. When one investment goes up the other may go down, but overall it balances out.
Don’t pull out
Nothing is ever accomplished when you pull out – in every sense of the word. This is especially true when it comes to your investments. If the market is taking a beating and your investments are dropping why on earth would you sell.
If the value of your portfolio is down and you cash out then you are actually going to take that loss. In the meantime it’s just on paper so if you’re investing for the long term just leave your money where it is. The market works in cycles it will recuperate.