Do you consider yourself an investor? If you’re a woman, the answer is probably “no.”
Even women who easily manage their budget often are reluctant to embrace the idea of investing in the financial markets. But it’s probably even more important for women than men that they harness their money to the power of those markets.
Here’s why: A confluence of factors is leading to a chasm in the amount of retirement income women have compared with men. Thanks in part to the gender wage gap and lower average Social Security benefits, plus smaller retirement-account balances, the median annual income of women 65 and older is 42% lower than men’s, according to a study by financial-services firm Prudential Financial Inc. The study is based on several data sources, including the U.S. Census and the Social Security Administration.
The retirement-income gap is compounded, at least partly, because women often hesitate to embrace investing. And one reason for that is generally women want to feel completely knowledgeable before deciding on anything, whereas men tend to feel more comfortable winging it, according to an analysis of over 30 studies, cited by Prudential.
Thus, for a lot of women, if they don’t feel they really know about investing, they’ll stay on the sidelines. Combine that desire for more knowledge with a lack of time—women spend an average of 28 hours a week on unpaid work, which is 65% higher than men’s average, according to Prudential— and the result is women failing to invest.
“When it comes to investing, women’s shortage of time, combined with their desire for more information in decision-making, may fuel procrastination, lower engagement, and reduced confidence,” according to the Prudential study.
Perhaps it’s no surprise, then, that even though the vast majority of married couples surveyed said they share financial decision-making, fully half of those couples also said that investing is the husband’s province, according to a survey by financial-services firm UBS, cited by financial adviser Alice Finn in her new book, “Smart Women Love Money.” Finn is founder and chief executive of PowerHouse Assets, in Concord, Mass.
Yet there is no sexism or gender bias preventing women from investing, Finn notes.
“It might be a long time before we close the gender wage gap or pass legislation to guarantee paid maternity leave,” Finn writes, “But you don’t need to wait for anyone else’s consent before you get more engaged in your financial future.”
Finn also cites a Stash Invest survey that found that 60% of millennial women don’t see themselves as investors. “In actuality, an investor is anyone who puts money to work hoping to get a financial return,” she writes.
Who among us doesn’t want our money to work for us? Too often I’ve heard women say that “personal finance is boring” or “investing is too complicated.” But having the money to reach our goals in life is not boring, and investing is definitely not complicated. So why not let the financial markets help us build our wealth, even as we spend most of our time enjoying our lives, careers, families, and adventures?
Whether you’re trying to save through a 401(k) or other retirement plan at work, have a lump sum that you want to invest for the long-term, or are thinking that you’ve got $100 you could spare every month to invest for retirement, now’s the time to embrace the power of investing.
Below is a brief rundown of how to start investing, culled from Finn’s book as well as a free investing guide produced by Ellevest, an online financial adviser (look for the guide on Ellevest’s website, under the Resources tab).
You must have taken a peek at this year’s billionaires who made it to the top of the list of those who added fortunes to their wealth. How many billions did they gain over the previous year’s figures?
Most investors think that having a high debt is undesirable and must be avoided. Naturally, they tend to see it as adding more risks to a company’s present exposures. And once that company defaults on its debts because of underperformance, it could fold up.
Nevertheless, high debt can lead to positive consequences. It can bring in greater returns, even offsetting the greater risks involved in the process.
The major reason why debt can improve overall returns is because it costs much less than equity. A firm can raise capital either through equity or debt, with debt generally offering a less expensive option. Hence, maximizing a company’s debt levels in order to generate higher returns on equity is more logical. It can lead to greater profitability, stronger share-price performance and increased dividend growth.
The proper circumstances
Admittedly, maxing out a company’s debt levels is not a wise move at all times. Businesses with highly seasonal performance and dependent upon the conditions of the general economic environment might encounter great difficulties if their balance sheets are heavily leveraged. During times of low returns, they may not be able to undertake debt-servicing steps, aggravating the company’s situation.
On the other hand, companies performing in sectors that offer strong, consistent and viable revenues should increase debt to comparatively higher levels to enhance the gains for their equity-holders. For instance, it is to the advantage of utility and tobacco firms to raise their debt levels because of their high level of earnings visibility and the relatively strong demand for their products.
During periods of low interest rates, it certainly makes sense for businesses to borrow as much as possible. The previous ten years provided such an opportune time to borrow, rather than to lend. Global interest rates have experienced such record lows, thus, leading many companies in various sectors to decrease their overall borrowing rates.
In the future, a higher rate of inflation is expected, portending higher interest rates. Although it could lead to increases in the cost of servicing debt, it should be compensated somehow by higher prices passed on to the end consumer. Moreover, a higher inflation rate will serve to diminish the real-terms value of debt. This can lead to increased levels of borrowing in the future.
Although increasing debt levels can also increase overall risk, it can be a viable step under the proper conditions. During periods of low interest rates, businesses with strong business models may enhance overall revenues by raising debt levels. And while higher interest rates may entail rising costs of servicing debt in the future, higher inflation may reduce the real-terms value of debts. Hence, investors can opt to buy stocks with a modest degree of debt exposure to optimize their overall gains over the long-term.
For many years, value investing has grown to become a very popular and profitable investment strategy. Among those who consider value investing as a viable choice are Benjamin Graham and Warren Buffett – two of the most successful value investors with spectacular gains over a long period of time.
The expected returns from value investing are comparatively high, although the risks are oftentimes much higher than most investors can handle. This is because value investing can result in an investor being subject to value traps, which occurs when a stock’s price is low for a very valid reason. What are value traps?
Surprisingly, value traps are more common than most investors realize. In spite of global share prices having increased from the beginning of the year, many other shares will still actively trade at significantly low prices in comparison to the broader index.
Although some might catch up and recover, others will not. Nevertheless, low-priced shares commonly appeal to value investors since the capital gain potentials are attractive. In short, for a good number of conservative investors, value investing may provide a high-risk option which could bring a substantial loss.
Value traps may indeed provide a trading risk for value investors who do not realize that “value” goes beyond merely having a low share price. According to Warren Buffett, “It is better to buy a great company at a fair price than to buy a fair company at a great price.” Ultimately, the viability of a company must be measured along with its share value.
Hence, if a firm’s shares are selling at a lower price than their net asset value, a potential risk in the future might keep them from recovering the valuation deficit. Likewise, a stock which is valued according to the wider index may in reality provide significant value for money if there is a positive expectation of a rapid increase in returns over a medium-range period. In short, value investing can be a great strategy when you consider certain essential factors, such as price, prior to acquiring the shares of a company.
Obviously, with rising stock prices, value investing loses its appeal. As investors all over are buying, value investors are selling and choosing to invest in other assets, such as cash. Conversely, when market prices are down, value investors will be buying stocks instead of selling them, contrary to the overall market consensus.
Being a value investor then can be a challenging occupation; and, on the short-term basis, it is quite easy to suffer paper losses as past trends continue to prevail. However, on the long-term basis, it has proven to be a viable strategy for investors of a certain level of experience and capability. It is not totally risk-free. So, by not merely focusing on price, this approach can serve as a highly-dependable road to financial success in the long run.
Passive Income Sources that Require an Initial Time Investment
Most of these sources will involve setting up a personal website or blog; but that is not actually an expensive proposition. You may utilize the services of Bluehost for this purpose. They will provide a free domain name and will host your blog at an initial price of only $3.95 monthly, a really cheap outlay for the opportunity to create a passive income source.
Publish and Sell an eBook Online – Self Publishing has become a profitable source of income for many individuals. More often now, any eBook you buy from Amazon could be a self-published work. This is because self-publishing has become significantly easy; you should try it to find out how easy it really is. It simply involves writing and editing a book yourself, designing a nice cover for it and then submitting to a platform, such as Amazon’s Kindle Direct Publishing. Although there is no guaranteed success, that should not stop anyone from accomplishing one of the three proverbial things any person must do in life before passing on, besides having a child and planting a tree. And before that time does come, utilizing this passive income source requires plenty of marketing upfront before you can benefit from your investment.
Offer an Online Course on Udemy – Udemy provides an online platform for people to take video courses on various subjects. You can be a producer instead of being a consumer on Udemy by offering your self-made video course and selling it online. This passive income source is a great option for those who have the skills or talents in any particular artistic or academic field. Moreover, it multiplies your efforts several times over, compared to the conventional one-on-one or classroom tutoring mode – indeed a potentially lucrative passive income source!
Selling Your Photographs – Did you know that many websites, blogs and even magazines acquire their photos from websites featuring stock photos? So, if you are into photography, you can turn in your favorite shots to stock-photo sites and earn a fee each time someone buys one of your photos.
License Your Music – In the same way, you can have your music licensed to bring you a stream of income through royalties paid by those who use your music. The usual venue for licensing music is through YouTube Videos, through ads and other means.
Design an App – If you are a smartphone or tablet user, you are probably very familiar with apps downloaded into them. Perhaps, you yourself have a great idea for an app. In that case, get the help of a programmer to make that app for you. That should provide you some residual revenue.
Affiliate Marketing – Affiliate marketing involves collaborating with a firm (becoming an affiliate) to receive a fee or commission on a product. This approach of creating income works well if you have a blog or a website. It might take a long period before you can build up the idea in order to gain passive income from it. Check out affiliate marketing programs available online to find out which suits your needs best.
Network Marketing – Network marketing, also referred to as multi-level marketing, has been drawing people for many decades now and providing many of them with above-average income. You have probably heard of such firms as Avon, Young Living Oils, Pampered Chef and AdvoCare -- all engaged in multi-level marketing. This can be a great source of passive income. You can build a team to work under your banner (what is called your down-line people) who will provide you commissions from the sales they make, even if you do not make any sales at all or just make a token sales output based on your required quota as one team.
Design and Produce T-Shirts – Cafe Press provides online users to make their own T-shirt designs or other items requiring some designing work. You can earn royalties from the designs you make, especially the ones that become hits.
Sell Digital Files on Etsy – You can also sell your own artwork through Etsy which provides digital files of artwork people can print out for decorating purposes. Other popular digital files on Etsy are available for download. Who knows? Your collection of graphic designs might provide you a steady stream of passive income if you join the site.
Ideas for Semi-Passive Small Business Ventures
Vending Machines – Vending machines can be a fantastic low-maintenance small-enterprise venture. Any individual can maintain several vending machines in a string of nearby towns. Every two weeks, you can collect and refill them, bringing revenue for your future retirement life.
Car Wash – There are still many places that do not have car washes. It is a good semi-passive income source. A weekly regular maintenance job can provide a very comfortable schedule for a business idea that you can either personally manage or hire out to someone else.
Storage Rentals – You can also rent out to customers storage space for a monthly income. The main job involved is when opening any of the storage units for new customers.
Laundry Services – This is a rather debatable option for a semi-passive income source since it can actually involve a lot of continuing maintenance work. You can decide whether it is worth all the expected work.
Easy Passive Income Sources
Finally, here are a couple of easy passive income sources which demand no cash and no initial work. Although the returns are very minimal, nothing beats getting easy passive earnings.
Cashback Rewards Cards – Using a credit card to pay bills can provide you cash-back rewards. Allowing your rewards to accumulate for a certain period and later putting the easy money you saved into a passive income venture will do the trick for you. (Check if the card you use does not charge a yearly fee; or else you end up with zero revenue in the end.)
Cashback Sites – Similar to the previous one, you can choose to use a cashback site when shopping online. Why should you not get a hold of that free money for so little or for no work at all? You may decide between eBates and TopCashBack, the two most popular sites available.
Get Started Now
The best strategy for a beginner is to have only one passive income source instead of having 4 or 5 right away. This allows you to learn slowly the ropes first and to focus on building a passive income venture. Once you have mastered one, add another until you are fully content with the income stream you have built up.
At the start, a significant amount of money and time will be involved; however, in time you will realize that earning passive income is a cinch! Choose the most suitable idea, plan your venture and commit yourself to that income source until you start benefitting from it.
Do you want to earn some passive income? We give you twenty practical ideas to help you enhance your financial situation. You may need to invest some money or time to pursue your goals. Before you do choose which one will suit your needs and situation, take time to appreciate the meaning and value of passive income.
Proceeds from passive income streams demand an initial investment and plenty of careful attention at the start. But once you put in the time and the diligent work, the payoff starts to grow and can sustain themselves, providing regular monetary rewards with much-reduced effort in managing the investment.
From the actual personal experience of many people, augmenting to your portfolio the income from passive income sources can serve to enhance your earnings and fast-track your financial objectives in remarkable ways.
And so, if you want to begin cashing in on passive income ideas, arm yourself with these fundamental principles:
What Passive Income Requires
Firstly, let us do away with some misconceptions about passive income. The word “passive” does not mean you merely wait, doing nothing for the income to come. Every passive income source demands at least one of these two requirements:
1) An initial monetary investment, or
2) An initial time investment
Without at least one of these two, you cannot hope to acquire residual income. There are numerous passive income ideas you can apply no matter what your area of interest or involvement may be.
Passive Income Sources that Require an Initial Monetary Investment
Dividend Stocks – These are proven and reliable sources of passive income. Nevertheless, you need to do a lot of study to determine which stocks are worth investing a substantial amount of money into in order to obtain sizeable dividend returns. Investing consistently into dividend stocks can help you accumulate a significantly large residual income in the long-term.
Investing into the following investment ventures requires opening an account at the most reputable online brokerage in order to reap the rewards you expect:
Peer-to-Peer Lending – P2P lending involves providing loan money to borrowers who normally do not qualify for conventional loans. You, as the lender, have the power to select the borrowers and can also spread your financial exposure to minimize your risk. Two of the most common peer-to-peer lending platforms are Prosper and Lending Club.
Properties for Lease – A great way of gaining monthly income is through leasing out property. To maximize your income potential, outsource the handling of the properties to a competent management firm.
Crowd-funding has become a common way of starting out in rental properties. You can begin investing in real estate for as low as $5,000.
The advantage of utilizing a platform over a DIY approach is that you spend less time and effort in managing the investment.
Money Market Funds or CD Ladders – Creating a CD Ladder demands acquiring CDs (certificates of deposits) from banks in particular increments in order to earn bigger revenue on your money. Banks offer CDs as a low-risk investment but with also a low yield, providing an alternative investment choice for people who avoid high risk levels.
You may consider these popular market funds to gain high yield returns:
Annuities – As a form of insurance product, annuities can offer monthly passive income payments for life. However, before buying an annuity, consult a dependable financial counselor regarding the terms involved, since annuities may vary and do not always provide good returns.
It may seem rather inappropriate to receive personal finance advice from wealthy people, considering they deal with tons of money whereas the ordinary person can hardly scratch a decent living. What use can you get from such advice as “Invest in gold rather than in silver” and others of that sort? Nevertheless, they can offer some sound advice for any kind of financial situation. After all, they have an uncommonly wide exposure to many money matters. Get these free tips from some friendly billionaires:
Begin as soon as you can
For a few years, a Mexican businessman named Carlos Slim Helú held the distinction of being the world’s richest person, until Bill Gates reclaimed the title recently. Slim offers personal finance tips shared by most finance experts; and beginning early is one of them. This may not apply to people of more advanced age as they need to begin now to “redeem the time”, so to speak. For the earlier you start getting serious about handling, saving and investing your money, the greater your chances of avoiding making mistakes that will impact on your future financial security. Slim, for instance, bought shares in a Mexican bank when he was only 12 and worked for his earning father’s business for 200 pesos weekly before he turned 20.
Discover Your Passion
It costs nothing to start believing in your own abilities and potentials. Oprah Winfrey, another billionaire we all know, said that we are what we believe and that what we are now is a product of everything we have believed. You can change any situation you are in now; and the first step is to believe in yourself.
Once a person believes in his or her own self-worth, discovering one’s passion – whether it is music, sports or photography – will only require a healthy dose of diligence and perseverance to achieve success.
Christopher Paul Gardner, although a "mere" millionaire, was a homeless single-father once. Asked what his secret was, Gardner said, "Find something you are so passionate about, you can hardly go to sleep to do it again." If your passion is to make space-saving furniture, educate yourself on that subject through online articles or books now and become as good in it as you can be.
No Need to Become Sophisticated
Do you know how Warren Buffett made his billions? He accumulated his investment fortune by focusing on the fundamentals, that is, by choosing firms with strong yearly cash flows and those firms not in the danger of losing technical relevance in the fast-changing world of technology. He also spent his early years in investing on insurance firms. For many, it is not a fancy way to earn; but it worked out well for him. No matter how small or big your money is, the right way to invest is by sticking with the fundamentals.
Live a Simple Life
Just like the previous tip, Warren Buffet lived this motto – he still lives in a house he bought in 1957 for $31,500. Likewise, Carlos Slim also lives in the same house for over 40 years. Many people, however, continually seek things that bring on financial disaster instead of those things that bring on financial security.
Walking and Riding on Public Transport is Cool
Three billionaires we do not often hear of -- John Caudwell, David Cheriton, and Chuck Feeney -- either walk, ride bikes or take public transport to move about. Nothing beats these three means as far as saving money is concerned, aside from taking care of one’s health and the environment. There is no shame in riding public transport – only trolls think negatively of good things.
A Car is only a Tool, not a Luxury Item
Walmart owner Jim Walton uses a 15-year-old pickup truck while Ingvar Kamprad of Ikea uses a 10-year-old Volvo. Cars do not establish any real social or financial status. If you are into restoring or buying fancy or classic car models, go ahead as long as you have the money to spare or to invest. In general, however, even wealthy people only need to get from Point A to Point B safely and comfortably. A car is nothing more than a tool as useful for doing a task as a computer or a hammer. Diamond-studded Benzes or gold-plated Porsches are toys only Saudi princes can afford.
Some of us ordinary mortals get wide-eyed listening to billionaires dispense financial advice; others cannot take it at all, especially if they are going through financial straits. Yet many rich people began with as much money as the man behind the theater ticketing booth, or even less. These tips can serve you well in any financial situation, as long as you have the desire to improve your lot. Buy at the lowest possible price, earn as much as you can in any decent way and do not splurge your money on needless things. Pursue your passion and nurture it, no matter how much you earn from your job. The important thing is that you find fulfillment daily in the things you do.
Money itself is merely a tool for achieving genuine success and happiness. Being a billionaire does not guarantee happiness – or even success -- in life. Some billionaires, in fact, can learn a thing or two about true happiness from poor people.
Are you doing a financial spring-cleaning this year? Scan your papers to keep an electronic bank of valuable documents. There are certain steps to observe according to the kind of expense, asset or transaction; but, in general, make sure that your digital files of your records are as legible and accurate as your hard copies and also as easily accessible when you need them.
So, what documents do you need to save or discard? Here is a rundown:
Taxes – You may need to keep your tax documents while the statute of limitations applies. These will include the following: W-2 and 1099 forms, invoices, receipts, cancelled checks, mileage logs, proofs of payment and other records pertaining to deductions, income or credits claimed on your return.
Student loans – Never ever discard your student-loan master promissory note because it the legal support for your loans. Keep it until the time you have repaid the debt.
Credit cards – It is wise to keep credit card statements for as long as 7 years.
In case you are already paperless, determine how long to obtain your statements online. This is easier than eventually having to request them via snail mail in the future.
Real estate - Your FICO score measures your qualification for a mortgage and the interest rate you need to pay. You have to reach a score of about 620 to be considered by any lender in order to qualify. If you are not qualified for an affordable rate, you may have to wait before buying a home for the time when your credit improves – it will take more than 7 years to have negative activity on your report.
Insurance – Many do not easily warm up to the need for life insurance for obvious reasons, one of which is the uncomfortable feeling of knowing how temporary life really is. However, accepting the inevitability of our own mortality should convince us of the importance of keeping our original documents, such as assignment of beneficiaries, always available on hand.
Banks/brokers – Regarding documents for brokerage accounts and banks, you probably already hold an edge: majority of financial institutions provide a completely digital alternative, facilitating ease of storage.
Bitcoin – If you have bitcoin or some kind of cryptocurrency, download the most recent records without discarding any. Incidentally, IRS has started cracking down on cryptocurrency holders; and there is still no specific rule or stand regarding how to treat these tokens. Moreover, cryptocurrency transaction logs are most probably likely electronic-based. Knowing the uncertainty, there is no sense in discarding any record of such transactions?
Employee benefits – Employees accumulate so much paperwork from company-sponsored benefits, such as a 401(k), HSK and medical insurance policies. Keep these papers for a minimum of 3 years. As for EoB junk, you can discard them; but papers with tax or legal implications should be safely stored.
Retirement –The most important document is the beneficiary form, which is what you fill out when opening a retirement account and assigns your account to a beneficiary upon your death. It is not your will or living trust. Keep your forms are updated and inform your executor and beneficiaries where you store your papers.
A Professional’s suggestions on How to invest for your character
How does an investor balance his or her portfolio with the risks?
Richard Flax, chief investment officer at Moneyfarm, suggests: ‘We will adjust the contents of the portfolio according to the investor profile. That essentially requires adjusting the values of higher risk assets (such as, equities and commodities) and lower risk assets (including, government bonds and cash).
The risk exposure in an asset changes according to how a client responds to risk, allowing a target level suitable for every profile.
Any investment approach must look forward and backward, considering various risk metrics, such as volatility and drawdown, and creating portfolios founded on projected gains and past risk parameters.
Why diversification and time are important
Investors need to diversify but must avoid being overly diversified. Many people in the UK invest in a single stock or just a few stocks, depending only on a few firms and experiencing great volatility.
On the other hand, one can shift to the other extreme and have plenty of funds that provide the same objective, adding complexity, increasing costs and, in the end, not giving the desired gains.
You have no other choice than to take greater risks. No free rides in the process. Your money can rise or fall; determine where you are in the picture where you are comfortable. Go for the long-term duration.
Which type of investor are you really?
Consider these professional suggestions:
First, the right time frame -- with more time you have the potential to build more wealth through compounding and the lower the risk of short-term loss.
Determine also how you respond to loss, or volatility. Although volatility means nothing to an ordinary client – since performance is the main concern – how do you respond when the portfolio value drops?
Also, find out whether you are a nervous investor by asking yourself how often you check your portfolio.
A very important task is to educate yourself about the financial markets, as this determines how much you comprehend investing.
Lastly, how much do you possess? If you own several properties and have no mortgages, your capacity for risk is much greater as your will only lose a small amount in comparison to your wealth.
Looking forward and backward at the same time provides an advantage to the investor. As professionals, we aim for various degrees of risk based on what a client reveals to us and in what category of investor they fall into.
Many investors have no idea of what kind of investor they are. Instead of dealing with the question early on, they plod along with no idea what they are and what they are doing wrong.
This question is vital in finding out what your goals are, how you handle risk and how you respond to gaining or losing money – factors that greatly impact your investments.
Understanding these factors will help you avoid errors in choosing your investments. This will not only spare you from going through restless nights due to taking so much risk but also from losing bright opportunities to gain significant wealth.
Let us look at five various kinds of investor to help you appreciate the importance of this matter.
The conservative investor
The conservative investor is one who takes great effort in charting his or her course and safeguarding his money. Such type is a safe player, always concerned about gaining a better gain compared to merely holding on to cash; although this individual is content with being able to sleep soundly instead of tossing and turning at night in the hopes of achieving the biggest possible gains possible.
For various reasons these individuals could include senior investors nurturing their pension plans while making use of them, as well as younger investors who play it safe within shallow waters with their meager and hard-earned savings.
The focused investor
This type of investor is open to greater risk compared to the conservative version; although safeguarding their wealth is a primary consideration as well. And while they may be open to fresh ideas for investments, they tread cautiously and remain alert against anything that may endanger their investments.
The focused investors are always mindful of everything they do and remain steady on course with their investing strategy without being diverted or distracted by any mishaps. The have the tenacity to build their wealth through meticulous and prudent moves.
The driven investor
This type is the no-nonsense, business-only investor. They stay fixed on their goals and chart out a clear road map for those goals. He or she knows exactly the purpose for investing and what benefits to aim for. The next move is to choose the best investments to keep in a portfolio in order to attain the set goals.
The driven investor is open to taking on higher risk for greater gains, although this kind will make sure the rationale for doing something and what it will entail.
The exploring investor
This type of investor is obviously looking for a challenging discovery along the path of long-term investing. This individual has a deeply inquisitive mind. Investing has become a challenge for this investor and provides opportunities to test new ways of building wealth. Nevertheless, the exploring investor is not reckless but is open to experimenting to discover the most advantageous approach.
The exploring investor realizes that investing provides great wealth on the long-term basis and the chance to choose many directions goes well with this type. As a competent explorer, he or she keeps an emergency plan along with a broad mind for assessing the risks along the way.
The adventurous investor
The adventurous type of investor is one most open to taking steps that demand taking a leap of faith. This investor optimistically sees the glass as half-full, allowing for great possibilities in what others would see as dismal or risky.
This investor type has set up a contingency cash fund somewhere secure which allows him or her to handle investment risks.
As such, this individual goes for the unappreciated asset type or sector that is low-priced while others stay away from it, or could be picking more on the low market times – hoping that the long-term view favors such a strategy.
Nevertheless, the adventurous investor does not gamble; on the contrary, each move is strictly weighed for its consequences.
Keeping your money in bank savings accounts at present will produce negligible interest rates. Hence, leaving all your money in banks may give you considerable safety but not much growth. On the other hand, investing your money in stocks may bring higher returns; but the risks are much higher. And you could actually lose part or all your money at times.
Try these few easy rules to help you remain strong in the market and gain big returns through a large long-term stock portfolio:
1. Spread your investment. Diversification distributes your risks through a number of stocks in various markets as well as in bonds, mutual funds and other instruments. Follow a rule of thumb such that each instrument or stock should not be more than 10% of your entire portfolio. Likewise, try to invest in diverse national regions, Asia, Europe, US and rising new markets areas. Also invest into hedge funds, commodity funds and property funds. This strategy provides a safeguard against any failure in any specific sector.
2. Investigate. Do your research in various industries and from diverse sources. Opt for firms with products and strategies you are familiar with. Browse or visit as many online resources that provide tips on evaluating and comparing investments. Although historical performance does not assure future performance -- in general, choosing a mutual fund or unit trust that showed a strong record in the last couple of years and which requires low management fees is a good move.
3. Invest back dividend payouts. A significantly big percentage of the entire gains in majority of portfolios is a result of reinvesting dividends and not from stock price increase. For instance, a 3% yield may seem paltry; however, in the long run, it will produce a huge profit. Opt for investments that have a sound record of dividend payouts and retain them as your long-term leverage.
4. Keep the performers and sell the nonperformers. Constantly check how your investments perform in relation to the market index. You will be tempted to sell when some of your holdings are doing well for a quick profit; however, hold on to them on a long-term basis to maximize gains. As for market nonperformers, get rid of them even if you have the urge to keep them for a possible upsurge or an increase of your holding at basement prices. That is not the best investment approach, as suffering a low setback early in the process is better than a big loss in the future. Never allow you emotions to convince you to hold on to your stocks.
5. Avoid mob rule. Although difficult to pull since most people rush headlong, buy whenever the stock market is down, sell when the stock market up your least performing stocks and invest into other instruments, such as bonds and property.
6. Look far into the future. Avoid making trades so often, as agents’ fees will diminish your gains. Remember, be patient and aim for the long-term results. Trends and fashions do not last long. Be prudent in diversifying your portfolio. Never lose your equanimity at times when markets collapse – take them as open seasons for buying courageously.
Lastly, when you do need money, be ready to sell. Your investment is meant to support your personal and family financial needs; hence, make use of it instead of belt-tightening or living like Spartans in order to accumulate wealth until that time when you are too old to enjoy it – or worse, too dead.
Devin Consultants, a financial management company with hundreds of satisfied clients who trust the counsel and services we provide through our financial experts. Utilizing the latest technology, we can help you enjoy full online access to our financial management services.