Do you have a nest egg put away somewhere? If so, how much do you have, and what do you think is the best way to invest it? If you’re just starting out in your career or feel you need some additional funds to meet some financial goals, investing in stocks might be something worth exploring.
While there are plenty of ways to invest your money, stocks are one of the most common and accessible ways for the average person to put their money to work and build a portfolio that can grow over time.
Stocks are a type of security that allows an individual investor to own a small piece of a company. There are many ways to invest in stocks, from directly buying stock in a company to investing through mutual funds.
You may also consider investing through equity crowdfunding sites like Kickstarter for startups if you want to get involved with young companies before they go public. In this article we’ll dive into five fantastic tips on how you can invest in stocks.
Timing isn’t everything
The short-term price fluctuations of stocks are largely irrelevant for long-term investors. It’s important to keep in mind that if you invest in stocks, you’re signing up for a long-term commitment.
If you’re looking to buy Apple stock today and sell it tomorrow, that isn’t going to work out very well for you. What’s the best time to buy stocks? Generally, the best time to buy stocks is whenever you have the money and are ready to start investing.
Of course, you can’t buy anything if you don’t have any money saved up. You should first save up a good chunk of money in a savings account for emergencies, as well as for future financial goals like retirement.
Don’t only rely on your broker’s advice
There’s a reason why you should never go to a doctor who only tells you to take some pills. While many brokers and financial advisors make some great recommendations, they aren’t fiduciaries, and aren’t required to put your interests above their own.
What are fiduciaries? Simply put, fiduciaries are professionals who have a legal obligation to act in the best interest of their clients. Brokers, financial advisors, and even some financial planners are not fiduciaries.
This means that they aren’t legally required to act in your best interest. Which is why you shouldn’t solely rely on the advice of your broker or financial advisor. You can use the tips in this article to help you make the best choices for your financial future.
Don’t forget to tax-loss harvest
Tax-loss harvesting is the process of selling losing investments at the end of the year and replacing them with new investments. The idea behind it is that you sell your losing investments at the end of the year to offset the taxes from your gains and replace them with fresh new investments.
You can use the free investment tracking tool, Personal Capital, to easily harvest tax losses and keep track of your investments at the same time. Why should you tax-loss harvest?
It’s an easy way to boost your annual return and potentially save on taxes. It’s also beneficial for keeping your investing portfolio balanced. What to harvest? Harvest your losers that meet the following criteria:
Have a game plan before you invest
You might have heard the phrase, “No plan survives first contact with the enemy.” Well, the same can be said of investing without a game plan. What’s your goal? What do you hope to achieve with your investment?
Do you want to save up for retirement? Do you want to pay off debt? Do you need extra income to help cover living expenses? These are all important things to consider before you invest. You might want to invest in high-risk stocks if you want to save up for retirement and have a long time horizon.
By contrast, if you want to use your investment to pay off debt, low-risk stocks might be a better fit. What’s your risk tolerance? Risk tolerance is how much risk you’re willing to accept in your investment portfolio. Depending on your risk tolerance, you might want to invest in stocks, bonds, mutual funds, or exchange-traded funds.
Watch Out for Fees
One way to really cut into your potential gains is by investing in funds with high fees and/or not paying attention to small details. What’s one way to boost your gains? Pay attention to fees.
Investing in funds that charge high fees or buying expensive actively managed funds and neglecting small details like trading costs can cut into your gains. What are some fees to watch out for?
Keep an eye out for sales and upfront loads, management fees, loads (if investing in funds), annual maintenance fees, transaction fees, and redemption fees. These fees can add up over time and eat into your gains.
Don’t Just Buy and Forget
You might want to keep a detailed record of your purchases and why you made those purchases. This can come in handy when you’re doing your taxes or just want to review your portfolio.
What’s your investment strategy? What are the reasons why you purchased certain stocks? Are they meeting your expectations? What’s your investment timeframe? These are all things to keep in mind when buying stocks and make reviewing your portfolio easier.
Don’t invest all your eggs in one basket
Some people like to invest all their money into one type of investment. While this may be a good strategy if you’re trying to win a big jackpot at the casino, it’s not a wise investment strategy. What’s your investment mix?
What percentage of your investments should be in stocks? What percentage in bonds? What percentage in cash or other assets? These are all important things to consider when investing. By diversifying your portfolio, you can reduce your risk and protect yourself from being harmed by a major decline in any one type of investment.
Don’t forget to diversify
We’ve discussed it at length before, but it’s worth mentioning again. What’s your investment mix? What percentage of your investments should be in stocks? What percentage in bonds?
What percentage in cash or other assets? These are all important things to consider when investing. By diversifying your portfolio, you can reduce your risk and protect yourself from being harmed by a major decline in any one type of investment.