Thursday, September 13, 2007

My (not so) secret investing tips

I haven’t divulged my investing secrets to many because, well, no one has asked. So, I must volunteer them. I won’t share why you should invest in the stock market. I’m going to assume that everyone reading is aware of the historical average of the stock market ( roughly 12%).

It’s never too late to start investing and I want to encourage everyone to not only participate in your company’s 401k plan but also to invest outside of that. I don’t think that most 20 something’s know how easy and simple investing can be.

Here’s some rules to live by for those starting out investing (some are personal rules and some are generally accepted rules):

-Don’t invest anything you can’t afford to lose. It’s not the best idea to invest all you savings into the stock market. That would cause me so much stress (especially during a bear market). Also, to go along with that, don’t invest in anything you don’t understand…maybe that goes w/o saying though.

-Think longterm. The stock market probably won’t make you a lot of money if you take out your money a year later. Also, the only way to make tons of money in the long-term is to not touch your money once it’s in the stock market. The market will go up and down as the months go on and studies have shown that people who buy and sell as the market fluctuates don’t actually earn the same returns as people who just let their money stay for the ride. *Of course there are good reason to sell at times but I won’t get into that today.

-Be regular. I have found that making investing a regular habit (via direct deposit from paycheck) has helped me invest tons more than I though I’d be able to afford. It seems much more affordable to invest say $200 a paycheck then $5K at the end of the year.

-Use mutual funds.
Unless you have tons of money, it’s hard to get tons of diversification when you first start investing. That’s why I recommend investing in mutual funds. They provide instant diversification. You can buy mutual funds that invest in big US businesses, just tech stocks, businesses in other countries, small business and the list goes on. Plus, when you invest in mutual funds, you don’t have to pay a broker each time you buy or sell.


Chris said...

Thanks for sharing your financial wisdom with us Kara. I'd like to read a little more detail about the kind of investing you'd recommend though. Which mutual funds are your favs? Which tools do you recommend for picking mutual funds? What do you use to purchase your mutual funds: online broker? What do you think is going to happen with the real estate market in general, how about locally?

anne said...

here, here...i have the same questions as chris. you have to break it down even more for us common folk. :)

oh, and i'm referring to myself, not chris...

Doreen T. said...

I'm impressed, Kara!