Wednesday, June 23, 2010, AM | Leave Comment
No matter how the economy is behaving – recessionary or booming – following certain basics will improve your performance when investing. Also, it does not matter what your circumstances are and how much you are able to invest, as long as you keep investing consistently. It will eventually provide you with a more comfortable and enjoyable retirement.
Here are certain basic rules that should bring you considerable rewards:
Invest Early And Consistently
The sooner you put your money to work, the more you get to take advantage of the power of compounding. Investing consistently can ease market timing anxiety. Make IRA, SIMPLE, SEP or other qualified retirement plan contributions as early in the year as you can. Learn about Dollar-cost averaging is key to success when investing.
Go For Equity Mutual Funds
Over the long haul, stocks outperform bonds. Depending on your time horizon, you could put up as much as 75% of your assets in stocks especially if you are under 50 years old. Tips to follow the rule of 100 when investing.
Prepare For Retirement
It’s quite likely that you will spend 20 years or more in retirement. Therefore, you should think like a long-term investor. When retirement is 5 years away, switch some money from more aggressive to less aggressive stock funds. Revisit your investment portfolio for retirement once a year.
Don’t Be Blindly Loyal
If a fund starts under-performing its peers, move to another fund with similar objectives. In investing, blind loyalty is not rewarded.
Avoid “Big Small” Cap
In your portfolio, allocate resources for small cap funds especially that have less than $500 million in assets. Once funds surpass that limit, it’s difficult for them to be effective in the small cap arena.
Make sure you own enough different types of funds to smooth out your performance over time. Don’t take needless risks by concentrating on one or two types of investments.
International funds surely can enhance diversification and performance without adding to long-term risk.
Avoid Individual Stocks
Almost all investors will do better over time if they let professionals manage their money.
Change Course If Need Be
If you are on course, relax but don’t change course. If not, make adjustments in your investment strategy. Do it sooner than later.