Nine Ways to Get Your Finances in Shape
- Aim Before Firing
Investing is about amassing the money necessary to pay for your financial goals. It is not about getting rich, beating the market or enjoying the thrills of Vegas in the comfort of your own home.
- Save Yourself
Most successful investors accumulate wealth by combining a long time horizon with a healthy savings habit.
- Fix On a Mix
The key to both your long-run results and your portfolio's short-run risk is your basic mix of stocks, bonds and cash investments.
- Play the Angles
When picking investments there are three key attributes to consider: risk, return and cost. Most investors concentrate on return and ignore the more controllable risk and costs.
- Reduce Risk
With diversification, the spreading of your investments over different asset classes, you can earn comparable returns with less risk.
- Look Down
There is the risk inherent in any particular investment. Then there is the risk that we perceive. Stock investments that did not appear risky in early 2000 caused sleepless nights for some more recently. This is the time to figure out how much risk you can stomach.
- Expect Failure
Every penny we spend on investment costs means we collectively fall further behind the market average. Minimizing investment costs won't ensure market-beating performance, but it will give you an edge.
- Discount History
History does not offer a reliable guide to the future. Past share price patterns may not persist.
- Doubt Yourself
The bottom line: All our market-beating efforts may prove self-defeating. The more we strive to beat the market, the higher our investment costs.
