9 Tips for Investing Wisely

Investing is a necessity for some and an exciting side project for others. But, if you’re saving for retirement, more than likely you’ve had some experience with the stock market.

If you have a significant amount of investment knowledge, you may choose to manage your own accounts. However, most people aren’t confident playing the stock market on their own and can benefit from the knowledge and experience of a financial advisor. For newbies just getting their toes wet, in addition to the nine tips below, be sure to check out this quick start investment guide for beginners.

No matter how you choose to get started, these nine tips can provide you with a good strategy.

1. Map out a personal financial plan—Before you make any significant financial decision (investment or otherwise), take some time and plot your financial journey. This journey should include what has happened in the past (positive and negative) as well as what your goals are for the future. It’s always easier to get where you want to go when you have a map, right?

    

   If you don’t feel comfortable doing this yourself, enlist the help of a financial advisor.
    

2. Find your risk comfort zone—Of course, all investments come with some degree of risk. Stocks, bonds and mutual funds, for instance, carry more risk than certain cash deposits with federally insured financial institutions.

    

   The more risk you choose to assume, the greater the potential for a higher investment return. Evaluate your timeline—a longer-term goal is typically better served by carefully investing in higher-risk investments like stocks or bonds. Whereas low-risk assets like cash deposits, term deposits or money markets, may be more appropriate for short-term financial goals.
    

3. Mix it up for a lower loss potential—An appropriate mixture of low- and higher-risk investments can help protect against significant losses. Historically, market fluctuations don’t negatively impact stocks, bonds and cash deposits at the same time. So, if you have a healthy mix of investments, the risk of loss goes down. If one category is down, another is likely to be up.
    

4. Diversify your investments—Tread cautiously if you’re thinking of putting a large portion of your money into one investment, whether it’s your employer’s or another company’s stock. If things go badly, you could experience substantial losses.
    

5. Build your emergency fund—Before you start investing, make sure you have an adequate emergency fund. Open a new savings account just for this purpose and deposit at least three-to- six months’ worth of expenses. This way, you’ll have the cash to get through in the event of an emergency (job loss, medical expenses or home repairs).
    

6. Tackle high-interest credit card debt—Paying down your credit card debt can do more for your financial situation than many other investment strategies. Impervious to market conditions, paying off debt can improve your credit score and free up cash for additional investments like contributing to retirement or emergency accounts.
    

7. Don’t leave retirement money on the table—If your employer offers a company match on your retirement plan contributions, maximize the amount. It’s free money! No matter your age, take advantage of this investment.
    

8. Reassess your investments from time to time—Every long-term plan needs fine-tuning now and then. Meet with your financial advisor annually to make adjustments and better serve your changing needs. Maybe you’ve gotten married or have a parent that will need ongoing medical care. Modifying your investment strategy can maximize your returns.
    

9. Watch out for fraud—Scammers have infiltrated just about every facet of our lives, including investing. Beware of investment opportunities that seem too good to be true. Do your due diligence—if you’re considering a new investment, investigate it thoroughly before you put any money forward.

Bottom line 

We hope these tips have helped you decide how to start investing—or how to improve your performance if you’re already there. We’ve said it before, even if you follow all these tips to the letter, remember that your account may experience some short-term fluctuations which can put your money at risk. Monitor your accounts frequently and educate yourself before making financial decisions.