What Are The Principles Of Good Investing?

When you start investing, you have a lot of decisions to make that can impact what will happen to your money. You have to deal with risks, costs like broker fees and taxes, and how long you plan to hold your investments. Investing can have a learning curve that goes with it, and if you’re new to investing, you may want to go with a proven wealth management advisor to help you reach your goals. But here’s a few principles for good investing.

Determine What You Want To Invest For

If you’re like most Americans, you probably want to invest for retirement. That’s usually the ultimate goal of investing, but it may not be the only goal. Some people look for other long-term or short-term savings goals such as having a health savings account, saving to buy a home, or perhaps for a child’s college tuition. Others may have a passion for finance and investing and may want to become day traders for the thrill. Others may see investing as a passive income from which they earn dividends. But whichever goal you have will ultimately drive your decisions.

Determine How Much You Want To Invest

Maybe you thought investing automatically takes thousands of dollars just to get started. That’s been true in the past, but today you can get started investing with smaller amounts of money if you’re just looking to get a feel for it. According to a recent SoFi Invest article, “But when you do keep your cash in savings, you’re actually losing money over time. That’s because of inflation. Over the years, cash loses some of its value—the same amount of money can buy fewer things—as the cost of living increases.” If you have a lot of cash that you’d like to see grow and beat inflation, you might open a standard brokerage account, or open an IRA with a large portfolio. But if you want to invest a smaller amount, you might be better off opening an account on an investment platform where you can invest smaller amounts.

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Determine The Return On Investment You Want

Before deciding how you want to invest and what risks you want to take, you want to consider what kind of return on investment you want. But what is a good return on investment? It depends on how much you expect your money to grow over how long, and how the costs might impact it. For example, a return of 10% annually or less may not be beneficial if you have high expectations over the short-term, but it may be a great one if you’re hoping to meet long-term goals. A higher rate of return can be great if your investment succeeds, but it also comes with higher risk.

Determine What Type Of Assets You Want

If you’re looking for relatively safe investments and relatively little risk, CD accounts, bonds, mutual funds and some ETFs may be right. If you’re looking for more risk, Individual stocks, high yield bonds, options trading, and real estate assets may be more your type. You should stick to what you know, or with what a reputable advisor recommends.

The bottom line is you need to have a clear direction of where you want to go with investing, and make sure you don’t deviate from it. Be willing to venture out in some instances, but never take on more risk than is necessary.

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