1Be More Aggressive When You’re Young
Keeping things simple when planning your investing strategies is always a good idea. Stay focused on the long-term is also another good strategy. And keep money invested in stocks to hedge inflation. All good ideas. First up: Think about OVER investing in stocks. You heard me right. Because for some people, in some situations—say a young person in their 20s or 30s—you need to consider your assets BEYOND your portfolio. For example, your earning power. That means you can seize the chance to be aggressive. In other words, save more and be more aggressive when you’re young. Heck, that’s what you’re doing with your mortgage, right?
2Invest In Stocks Only When You Know You Have Enough Income
Big time losses can occur in stocks. That’s been the lesson of recent years, for sure. So knowing the fact that risk doesn’t entirely disappear when you invest in stocks ought to be motivation enough to save more and consider working longer. The more you squirrel-away, the less you have to rely on stocks to have a shot at your long-term goals and dreams. Instead of always thinking about the time you’ll have to stay invested in the market, invest in stocks only when you know you have enough income and safe investments to weather the ups and downs of the markets. Investing in stocks for the long-haul is not always a general, blanket-type, applies-to-everyone kind of statement.
3Investing In Indexes
This is of my favorite investing discussions. While indexing, as it’s called, means to just invest in an index and mirror or mimic the performance of a market, like the stock market, it’s not entirely low risk. When markets get volatile and outright crazed, you could be looking at some serious volatility, even when you own an investment that tracks an index. But generally speaking, I’m a fan of indexing. It keeps expenses down and also gives somewhat of an advantage over active managers who deal with portfolio turnover and churn. Again, with indexing, you’re not trying to BEAT the market. You’re trying to BECOME the market, to mirror its performance. If you can live with that, check out indexing.
4Lump Sum Investing
Ah, lump sum investing, rather than pushing all your investment dollars in at one time. Many people are on both sides of the fence on this one. I’m more a fan of dollar cost averaging. This means investing a set sum of money, say, 1-thousand dollars, and every month. That way, you’re investing a fixed sum, which means you’ll always buy more shares of an investment when prices are down, and buy less when prices are rising. Smart. But it only works over the course of time, say several months. The reason I like it is that it averages you a lower cost basis in your portfolio, which is always a good thing. It also mitigates your chances of buying right after a market crash, other at other times of exuberant trading activity in the markets.
Avoid momentum trading, or should I say, momentum investing. Steer clear of buying on dips. Heck, there are dips every day in the markets! And stocks that are dipping are doing so for a reason, you ever think about that?! If you can’t avoid bargain hunting, then my advice is look for those stocks that have good value—for example, have gotten beaten up, pay dividends consistently, et cetera—so you’re not fighting momentum, and you have some hidden value there. So beaten-down shares are okay. Just make sure you’re looking for good quality companies that might be in an over-sold position.