The “Do”s and “Don’t”s of Investing
When you decide to start making investments, you will run into a flurry of opinions as to what you should and shouldn’t invest in. Typically, it is the people with the biggest agenda who will shout the loudest. People will try to get you to invest, not in what will benefit you, but instead in what will benefit them. As you enter into this world of investing, it can be tough to swim with the sharks without getting eaten alive. Here is some basic advice to help you keep your guard up and make the best investment decisions possible.
- Put too much money in one stock. You never know what’s going to happen to the company you are betting on.
- Rely on forecasting models. Would you bet your money on the 10-day forecast from the weatherman? Probably not. Do you really think financial analysts and economists have any stronger of a grasp on the future than meteorologists? Probably not.
- Mistake activity for control. In the words of author Brian Tracy, “One of the very worst uses of time is to do something very well that need not be done at all.” Just because you are busy, that doesn’t mean you are accomplishing anything. Don’t frequently buy and sell just to feel like you are doing something.
- Trust a financial agent working on commission. If they are working on commission, they are looking out for their own best interests. Period. It’s not that they are bad people; it’s just that they’re faced with the wrong set of incentives. The more you pay, the more they earn.
- Diversify your portfolio. Buy stocks, not just in different companies, but also in different industries. Spread your portfolio as broadly as possible to smooth out the dips and dives.
- Use Index Funds in making investment decisions. An index fund relies on the efficiency of markets to establish a baseline of market activity that holds constant during fluctuations. Feel free to reach out to us if you wish to learn more about Index Funds.
- Err on the side of patience. More often than not, it’s better to wait it out for any given stock. Don’t sell every time there’s a small dip. Hold on to your stocks and rely on rebalancing of the entire portfolio rather than frantic buying and selling of individual stocks.
- Fire your broker and hire a coach. You don’t need someone who will charge you a fee to do your investing for you. Instead, you need someone who will help you understand how to become a better investor yourself. You need someone who will teach, motivate, encourage, and inspire you. You need a coach.
In the end, there are far too many “do”s and “don’t”s in the world of investing to be covered in a short article. That’s what financial coaches are for! If you are uncertain about a specific issue or are thinking of hiring a coach, feel free to contact us for a free consultation.
We want to help you in any way that we can.