Start investing with these 5 tips : NPR
Millions of Americans invest in the stock market as a way to build wealth over time, and while the market can fluctuate, investing in stocks is a great way to build your long-term savings. Even when the stock market feels like it’s in for some wild swings, starting to invest now can help you set yourself up for a more financially prosperous future.
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If you’re an everyday investor trying to go through reddit threads and youtube tutorials, this is for you. Here are some tips to get you started on your own investment path.
Reading: Npr investment advice
Betting on a hot stock is not worth it
despite the life-changing investment news headlines in a stock article (remember endgame early 2021?), it’s too risky to make short-term bets with sizeable sums of money about what an action will do next. Instead, some of the world’s most respected investors have long said that the best way to make money for everyday investors like you and me is to invest in index funds and hold those investments for long periods of time.
Most index funds offer low fees and will allow you to buy essentially the entire stock market. that way, if any stock falls, it won’t affect your portfolio. And if you really want to bet on individual stocks, the best advice is to do it with a very small part of your portfolio, and only with an amount of money that you can afford to lose.
build a diverse portfolio
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The key to everyday investing is diversification, which means owning different types of investments to spread risk. According to investment manager Paula Volent, you definitely want to own stock index funds because stocks over time have always offered the best returns. she suggests owning a broad u.s. stock market index fund, a foreign developed markets index fund, and an emerging markets index fund.
volent also says you need investments that can do well when stocks are doing poorly. these include treasury bonds and real estate funds. As for how to know how much of each of these components is the right combination for you, there are different ways to find out. Age-based, or so-called “target date” index funds bring together a combination of many of these components for you with a risk profile based on how many years you have until retirement.
work with a financial advisor? make sure they are paid
Experienced investors highly recommend consulting with a financial advisor, but be sure to talk to an expert who charges only fees, who do not take commissions for directing you to one investment over another. once you find someone who acts in your best interest, try to meet with them once a year or every two or three years. find someone you can pay a flat fee for each visit. this will save you money in the long run.
rebalance your investments for stability and maximize the return on your investments
There is no need to panic, even in times of large market corrections. With a diverse investment portfolio, you actually have the opportunity to make some extra money on the big swings in the markets by selling what has gone up in value and buying more of what has gone down.
Let’s say you’ve decided you should have 50% of your portfolio in a mix of stock index funds. If stocks crash and bonds rise in value, then the stock portion of your portfolio could be worth only 45% of your overall portfolio. you can sell some bonds and buy more stocks to get back to the goal of your investment plan. Buying low and selling high is the right way to make money investing. but you’re not doing this randomly. you are sticking to your plan for your target allocation in your main portfolio.
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Bottom line: Don’t panic and sell everything just because the stock market crashes and you see other people panic and dump their stocks. that can cause irreparable damage to your portfolio. buying high and selling low is not a good way to make money.
check out some great books to help guide your investments
Do you want to know more? If you’re going to read a book, check out Economist David Swensen’s Unconventional Success. is the definitive introduction to everyday investing from a world-famous investor who set out to tell the rest of us how to do it right. Jack Bogle’s Common Sense book on mutual funds is another classic.
The podcast portion of this story was produced by Janet W. lee.
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