Investing
There are a few things about investing that
you need to know in order to succeed.
Investing
doesn’t mean gambling. Very few professional mutual
fund managers... less than 500 out of 12,000 can actually consistently
beat the stock market averages. If the pro’s can’t
beat the market when they spend 16-hours a day trying, what are
the odds that you will do better? As Ben Stein says… if
you don’t have time to do all the research, consider investing
along with the market and buy an Index Fund or low cost Exchange
Traded Fund.
Invest with a time frame in mind. Match
your investment choices to that timeline. In other words, if you
only have two years before you intend to use the money for a down
payment on a home, do not choose an investment like a stock or
stock fund that is geared for a much longer timeframe.
The golden rule of investing is to diversify. You’ve
heard it over and over because it is true. Your portfolio will
live a longer and more healthy life when you blend different types of
investments, like stocks, bonds and real estate. Consider including
international stocks or funds. diversification wins all battles.
Keep in mind: over the past 70 years, the U.S. stock market has
performed best - - 11% on average. Bonds average about 5%
and real estate – depending on location, about 3%. Invest
according and remember, inflation tends to average around 2-3%
which eats away at your investment returns year over year. If
you think cash is a safe long-term investment, you need to know
that inflation will reduce the value of your cash.
Diversification wins all battles
And yes, if you are patient, compounding will do all the work...
The Power of Compounding
Pat Terrion, Finance Professor at the University of Connecticut says that Earl Crawley, who was featured in episode 202, made his fortune by using compounding to do the heavy lifting.
Compounding is like a snowball going downhill, it gets larger as it goes down and the longer the slope, the larger the snowball will grow. Jack says compound growth is more like a chia pet - - leave your investment alone and voila, it will just...grow all by iteslf!
Compounding occurs when every dollar earned on your savings is reinvested, so you earn money on your initial capital as well as any returns such as dividends, interest and capital growth. So, the sooner you start saving, the faster your money will grow.
Warren Buffett's #1 Rule:
Don't lose money.
Rule #2:
Don't forget rule #1
Investigate
before you invest. 
Whether it's your retired friend who used to a big shot CFO,
your cousin's investment advisor who owns two yachts or even your Doctor or
local Clergyman, there's a scam out there looking for you. You
really want to check the financial advisor's record before
you hand over any personal information. Any advisor should be either licensed or registered. It doesn't guarantee investment success but at least there's a record of his background on file. Read it as carefully as if your life savings depends on it, because it just might.
It's never too early or too late to become and educated investor.
Children and teens
learn most of their money skills at home, not in the classroom. The earlier
you can start your child on the right road, the less money you'll need
as you go along because you have the power of time and compound interest
working hard for you. It's also never too late to catch up. Even if you're
forty or fifty-something, you may well be able to keep earning money for
another 20 years. Plus, at that point in your career, you're probably making
more money now so and can afford to invest for your future wealth. Just
a few hundred dollars a month will add up to hundreds of thousands of dollars
over that time. Especially if you have as much as possible working for
you in tax-deferred accounts.
Click these links to check up on your broker or
financial advisorCheck your independent Financial Advisors
Or Money Management Firms
Check your broker's background
Check with your State
