Why learn the hard way by losing your hard-earned dollars making the same old common investing mistakes. It's much better to learn from the experience of thousands of investing professionals over the last 100+ years. Here are the top ten timeless investing tips. (See Part II of this article for the other five tips).
- Invest for the long term. If you are looking for quick winnings all you're going to do is lose money, sooner or later (don't be fooled if you're making money while the market is rising, that's easy, the key is are you making money over the long term even across inevitable market downturns). By investing for the long term you are picking investments that have a proven ability to appreciate over the next 5-10 years, and if there is a 6 month or even 18 month down turn, you still have a good investment and time is on your side.
- Diversify. Don't put all your eggs in one basket. You don't need to invest in 100 different stocks or vehicles, but neither should you be overly concentrated in just 5. Financial statistics show that by having at least 20-25 separate investments, none being more than 5-7% of your total position, you have significant diversification without the hassles or costs of managing 100's of investments. Today another key aspect of diversification is to be sure to invest in global stocks as well as U.S. stocks.
- Be patient & be consistent. Don't chase today's fad (or worse yet, yesterday's fad). Research your options, choose carefully, put your money at work, and then be patient. If you chose investments that should perform over the long term, then be confident in your strategy and be patient, and don't panic sell when the market turns south for a few months.
- Save regularly from your earnings. Set aside 10% or more of every pay check automatically every month (a good idea is to set up an automatic deduction to your savings account). Then regularly take these savings and move them to your investment account and buy regular amounts of stock (see Dollar Cost Averaging) below. Follow good strategies for saving money on airlines and outdoor sign purchases.
- Don't spend your investment earnings; instead, reinvest them in your investment portfolio. As your investment portfolio throws off earnings and profits, do not make withdrawls for a new boat or remodel. Instead, reinvest the money in the investment account. This way you have the magic of ‘compound interest' working in your favor – your annual investment earnings will grow ever higher because the underlying investment capital at work is growing.
Time has shown that these principles will work with little risk and great returns, so long as you don't freak out on every day's stock market ups and downs. And, best of all, you'll have a unique and invaluable dividend every day of your life – the ‘sleep at night' factor: because your investments are carefully and systematically deployed for the long term in a well-diversified manner, you can live your life focusing on other issues, knowing that your investment account is doing it's job: growing safely and providing for your dreams.