Treat
your money like soapYour money is like soap. The more you handle it, the less you have.” So true. Moving money entails transaction costs, sometimes tax consequences, and most often, you’re going to move it at the wrong time. How do I know this? Year after year research shows that average investors underperform the market, earning half of the returns they could have all because of their poor timing abilities. For better than average investing, when you move money, it needs to be part of well-designed investment plan, not a last-minute reaction.
Learn the term
"dollar cost averaging"
Dollar cost averaging is a strategy used to reduce market risk by
automatically investing a set amount at regular intervals. It forces you to buy
more shares when the market is down, and buy less when the market is up. Smart
savers automate their savings plans and let them run for years and years at a
time. Be a smart saver, and if you don’t already, start dollar cost averaging.
If you can't handle the heat, steer clear of the fire
Stocks are not for everyone. You can build a solid financial plan using only guaranteed, safe investments. If you don’t understand stock market or what a mutual fund is, probably best to avoid these investments all together until you learn more. If you do understand, but get too nervous, than stay out of the market.
Know the Right Time to Buy
Your colleague just doubled his money because he bought Apple stock at the right time. Does that mean he was smart... or lucky? Slow and steady savings with a disciplined plan delivers results, much like the Turtle, who steadily plods along. Bet on luck or skill and it may turn out okay, or you may get an unpleasant surprise.
Get comfortable with cash
If you feel like money sitting in cash or money market accounts is wasting away, think again. Cash can be a great place to store money while you research, study and learn how to make smart decisions with it. People with cash have the ability to take advantage of great investment opportunities when the real estate or stock markets go down. Those who were fully invested don’t have those same opportunities.
Know what you owned
A stock is not the same as a stock index fund. A bond fund is not the same as a stock fund. It is amazing how many people who own large cap equity mutual funds react to an irrational fear that they can lose all their money. Do they have any idea what they own? Do they really think all the 500 largest companies in the U.S. are going out of business at once? There is a distinct difference between what I call a Level 5 Investment Risk, where you can lose all your money and taking on a Level 4 Investment risk, where you can’t.
Read books, not just websites
I love the internet. The amount of information available is astonishing and at times, overwhelming. But to get depth of knowledge in a topic, I still think nothing beats a good book. Educated investors earn higher returns. Commit to learning first and you'll get better at investing.
Study your shopping habits
When was the last time you went to the mall was, saw something you really wanted that was on sale at half price, and thought, “No, I am afraid the price might go down more. I am not going to buy it now.” When stocks drop substantially in price that means your future financial goals are on sale. Better investing means acquiring the knowledge and discipline to recognize when things are on sale, and buy low.
Remember, THEY do not know you
Who is “they”? All the people (including me) who offer advice and financial commentary to the public. We don’t know you or your situation. We are offering advice that is applicable to a broad population. Does it apply to you? I don’t know, and neither do “they”. Only you and if you have one, your personal financial advisor, can determine if the advice is applicable to your situation.
If you can't handle the heat, steer clear of the fire
Stocks are not for everyone. You can build a solid financial plan using only guaranteed, safe investments. If you don’t understand stock market or what a mutual fund is, probably best to avoid these investments all together until you learn more. If you do understand, but get too nervous, than stay out of the market.
Know the Right Time to Buy
Your colleague just doubled his money because he bought Apple stock at the right time. Does that mean he was smart... or lucky? Slow and steady savings with a disciplined plan delivers results, much like the Turtle, who steadily plods along. Bet on luck or skill and it may turn out okay, or you may get an unpleasant surprise.
Get comfortable with cash
If you feel like money sitting in cash or money market accounts is wasting away, think again. Cash can be a great place to store money while you research, study and learn how to make smart decisions with it. People with cash have the ability to take advantage of great investment opportunities when the real estate or stock markets go down. Those who were fully invested don’t have those same opportunities.
Know what you owned
A stock is not the same as a stock index fund. A bond fund is not the same as a stock fund. It is amazing how many people who own large cap equity mutual funds react to an irrational fear that they can lose all their money. Do they have any idea what they own? Do they really think all the 500 largest companies in the U.S. are going out of business at once? There is a distinct difference between what I call a Level 5 Investment Risk, where you can lose all your money and taking on a Level 4 Investment risk, where you can’t.
Read books, not just websites
I love the internet. The amount of information available is astonishing and at times, overwhelming. But to get depth of knowledge in a topic, I still think nothing beats a good book. Educated investors earn higher returns. Commit to learning first and you'll get better at investing.
Study your shopping habits
When was the last time you went to the mall was, saw something you really wanted that was on sale at half price, and thought, “No, I am afraid the price might go down more. I am not going to buy it now.” When stocks drop substantially in price that means your future financial goals are on sale. Better investing means acquiring the knowledge and discipline to recognize when things are on sale, and buy low.
Remember, THEY do not know you
Who is “they”? All the people (including me) who offer advice and financial commentary to the public. We don’t know you or your situation. We are offering advice that is applicable to a broad population. Does it apply to you? I don’t know, and neither do “they”. Only you and if you have one, your personal financial advisor, can determine if the advice is applicable to your situation.
By Dana Anspach
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