A MoneyTrack Investing 101
Congrats! You’ve taken the first step to start investing by learn the basics. In this section you will find some of our favorite articles and lessons to help you on your way. To get you started, here are MoneyTrack’s Investing Lessons to live by…
Lesson #1: Investing doesn’t mean gambling.
When you lose at the gambling table you walk away empty-handed. When you invest, even if you have a loss, you still end up owning a piece of a company and that has real value. When investing is approached the right way, with a carefully laid out, long-term strategy, success is a sure bet.
Lesson #2: 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, it’s best to stay away from investing in stocks because they are geared for a much longer time frame.
Lesson #3: Asset Allocation – The single most important financial decision you will make!
Asset Allocation simply refers to the way you choose to divide your money among different assets. You can choose to divide (allocate) your money (assets) between any number of things: real estate, stocks, bonds, even having cash at the ready — “cash on-hand.”
Lesson #5: Golden Rule of Investing – 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. Diversification lowers the risk of any one investment.
Lesson #6: Start Early: The Power of Compounding
Pat Terrion, Finance Professor at the University of Connecticut says that Earl Crawley, 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. 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. The sooner you start saving, the faster your money will grow.
Lesson #7: Investigate Before you Invest.
Whether it’s your retired friend who used to be a big shot CFO, your cousin’s investment advisor who owns two yachts or even Doctor or local Clergymen, there’s a scam out there looking for you. All advisors should be either licensed or registered, so be sure to check the financial advisor’s record, before you hand over any personal information.
Economics guru Ben Stein gave MoneyTrack great advice… if you don’t have hours to analyze certain stocks, consider investing along with the market and buy an Index Fund and/or low cost Exchange Traded Fund .
