5 Rules Of Thumb Toward Successful Investing
It isn’t difficult to be successful in investing if and only if your venture is well-planned and the investor is disciplined. Absent these two elements, the venture will be nothing more than a crap.
The thing is to put together an investment plan and make it happen. It takes considerable amount of brainwork, patience and diligence to set your investment in motion but in the end, it will pay off.
You might be investing in bonds or other forms of investments but you have to control your emotions. Investments and emotions simply do not blend. You have to develop control as well as the right attitude to make your financial goal a success.
Here are 5 rules of thumb, as provided by AOL and presented by Vanguard, to help you catch that elusive thing called success in the investing realm:
Diversify, diversify, diversify
You can’t predict which way the markets will move—or which investments will go up or down—but you can spread the risk around by investing in a mix of stocks, bonds, and cash investments and diversifying your investments within each of those asset classes. That way, when some investments aren’t growing—or are even falling in value—other investments may carry the day, helping to even out the ups and downs of your total portfolio.
Keep costs down
If you’re a careful shopper, you know you generally get what you pay for. When you’re buying mutual funds, however, high costs don’t mean you’ll get more for your money. Instead of ensuring quality, high costs actually reduce how much of a fund’s returns you get to keep. Think about it.
Pay attention to taxes
After investment costs and inflation, taxes take the biggest bite out of your return. To reduce your investment taxes, make maximum use of tax-advantaged investing opportunities, such as employer-sponsored retirement plans, traditional IRAs, and college savings plans.
Buy and hold for the long run
No one can predict the ups and downs of the market often enough to make market-timing a consistently winning strategy. Even if you were smart enough to beat the odds, frequent buying and selling could increase your taxes and trading costs enough to wipe out any gains. Besides, market rallies often occur suddenly and over very short periods of time. If you happened to be out of the market during those few days, you could miss most or all of the gains for that year. Don’t waste your time trying to predict the market. Be a buy-and-hold investor.
Know yourself
Some people can shrug off big market swings; others cannot. If you can’t sleep at night because the value of your investments is bounding around, you need to build a portfolio with a more conservative mix of assets and, if you can, increase your savings rate to increase the chances of achieving your goals. You may not reach your goals quite as fast, but you’ll likely be more rested along the way.
