The Five Simple Rules of Money Investing : In this article money pip describe how to money invest, follow 5 simple rules of money Investing. grow a portfolio, long-term investors just need to follow five simple rules.
5 Money Investing Rules
Rule number one:
Contribute early and often To achieve exponential growth, you need time and regular contributions. If you were to invest $200 per week for 30 years, with a 7% rate of return, you’d end up with slightly more than a million dollars. But only $312,000 of that will be your own contributions.
The other $700,000 would be due to compound interest. But if you can’t afford to contribute $200 per week, any contribution can have an impact, and the sooner you contribute, the more time compound interest has to work its magic. Think of investing like planting trees: the best time to start was years ago. The second best time is now.
Rule number Two:
Minimize fees and taxes. Even if fees and taxes seem like small amounts, over time, they can really add up. In our earlier example, if you were paying just a 1% fee on your fund, in 30 years, you’d have $178,000 less.
To limit these fees, choose funds with low expense ratios. To minimize taxes, contribute to tax-advantaged retirement accounts like a 401(k) or IRA before you contribute to any other accounts.
Rule number Three:
Diversify your portfolio, Putting all of your eggs in one basket is risky. Different types of investments carry different types of risk, so try to invest in a variety of asset classes–like stocks, bonds, and cash–and within those asset classes, further diversify with different kinds of stocks and bonds.
Rule number four:
Consider your time Horizon, or how many years you have to invest. If you’re saving for retirement, for example, this might be your retirement date. If you’re looking for higher returns, you may need to take on greater risk.
Younger investors can typically tolerate more risk, because they have more time to recover. The less time you have to recover, the less risk you can take. To create a portfolio that matches your time horizon, combine different types of assets to achieve the best balance between risk and return.
Rule number Five:
Focus on your long-term goals. The market fluctuates day-to-day, and if you try to time the market, you may miss out on returns. According to the National Bureau of Economic Research, If you invested $100,000 in the stock market in 2007 and didn’t touch it, 11 years later, it’d be worth about $238,000.
If you had sold your investment during the recession of 2008 and reinvested it a year later, you’d have $80,000 less than if you had stayed invested. Remember: contribute early and often, limit fees and taxes, diversify your portfolio, consider your time horizon, and focus on your long-term goals.
These five simple rules are the most important ingredients for investing success. Simple Steps for a Retirement Portfolio.The Five Simple Rules of Money Investing.
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