7 Essential Rules for Smarter Investing
Investing for the future is essential to any financial plan, but navigating the options can feel overwhelming for many investors. Whether you’re buying stocks and bonds, contributing to a 401(k), or exploring real estate, understanding the fundamental rules of investing is crucial for a stable, high-performing portfolio.
Though investment terms can sometimes be confusing, sticking to these 7 rules of investing guides you toward smarter decisions and long-term success.
1. Prepare Your Finances
Before you begin investing, you want to feel confident your financial foundation is solid. This includes paying off high-interest debt and having a small emergency fund of easily accessible liquid money available.
If you begin investing before you’re prepared, it can backfire down the road.
2. Know Your Purpose
Once you’re financially prepared to invest, it’s time to set a purpose. Your reason for investing could be to save for retirement, put aside money for college tuition, or save for a down payment on a home. Knowing your purpose makes the journey more meaningful.
Along with identifying your objective, you want to determine when you’ll need your money back. This guides you in deciding which type of investment to make since some are better for the long term while others are better for shorter periods.
3. Determine Your Investment Amount
Now it’s time to determine how much you will invest. You don’t need to make substantial investments, but get in the habit of making contributions regularly. It can be as little as $100 a month going up to thousands of dollars per month depending on what you can afford.
4. Automate Investing
If you have a 401(k) through your employer, you’re investing! It’s advantageous that your investments are likely automatic, because when you don’t have to make those payments manually, you are more likely to be consistent. If the money comes out of your paycheck or your checking account without you doing a thing, you won’t have the chance to decide against making your investment.
5. Educate Yourself
Investing isn’t a sprint, it’s a marathon. Most people don’t get rich overnight, so you don’t have to make spur-of-the-moment decisions about your investments. Instead, take the time to educate yourself about the choices you’re making. Also, don’t rely on someone else to tell you everything about investing. Even with a financial advisor giving you advice, you should have a general idea of how investing works.
6. Start Early
Since investing is a marathon, time is on your side. The longer you allow your money to sit in an investment account, the more money you’ll usually make. Don’t delay investing once you’re financially prepared. Each year you wait costs you hundreds and thousands of dollars. The interest you’re losing out on is essentially free money! Once you educate yourself on investing, get started. Your future self will thank you.
7. Building a Balanced Portfolio
You’ve probably heard the rule “Don’t put all your eggs in one basket,” which is a fundamental principle in the rules of investing. Because no investment is risk-free, diversifying across different asset types and industries is key to mitigating potential losses. This approach helps shield your portfolio if one sector struggles or a company underperforms.
Successful investing requires a strategic mindset and a long-term perspective. By making thoughtful, informed decisions over time, you can enhance your investment returns while managing risk. While self-education is important, partnering with a trusted financial advisor can make all the difference. An advisor can help tailor an investment strategy to fit your individual financial goals and situation.
Ready to refine your investment approach? Call my office at 830-798-9400 or email solutions@rosamondfinancialgroup.com to schedule your complimentary consultation today.
About Preston
Preston Rosamond is a financial advisor and the founder of The Rosamond Financial Group Wealth Management, LLC with over two decades of industry experience. He provides comprehensive wealth management and financial services to successful business owners, corporate executives, and affluent retirees who enjoy simplicity and seek a professional to help them pursue their goals. Preston personally serves his clients with an individual touch, a sincere heart, and his servant’s attitude is evident from the moment you meet him. Learn more about Preston or start the conversation about your finances with him by emailing solutions@rosamondfinancialgroup.com or schedule a call on his online calendar.