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Back to Basics
The financial markets are tricky to navigate. They have a way of humbling even the best and brightest. But perhaps more concerning is the fact that the investing public continues to make the same mistakes time and again. Statistics show that as investors, we repeatedly: chase hot mutual funds, don’t hold onto funds long enough, act on “stock tips”, don’t diversify, are swayed by media reports, and have notoriously bad timing.
Oh yeah … we also procrastinate. But none of this means anything if you don’t have any money to invest. So, the first rule is to save money. It doesn’t matter if you are out there knocking ‘em dead and making big money, or barely getting by. You have to save. Where do you start? Your retirement plan. Whether it’s an employer sponsored plan, an IRA, a Roth IRA, a savings account at the bank, or some combination of the above, you need to save money. How much? As much as you can.
Why look to your retirement plan first? Because for most people, the cumulative tax benefits available for most retirement plans are likely to be unmatched by any other type of savings plan. Also, the penalties for accessing the money before retirement are incentive enough for most to not spend the money.
The next rule of thumb is to diversify. If you don’t think a lack of diversification can sting you, call any ex-Enron employee. Also, no single asset (stocks, bonds, real estate, cash, etc) is the top performer year in and year out. So spread your money around (that’s called asset allocation). There is a combination of assets out there that will work for you and your loved ones.
Lastly, do your homework. There are meaningful differences in the quality, up-front costs, and ongoing costs of different investments … even for very similar investments. The savings that you can achieve in this area alone can make a huge difference over the long haul.
Pretty simple stuff really. Save money, put it to work in your retirement plan, spread your money around, and keep a close eye on commissions, fees and other hidden expenses. Yes, there’s more to it, and there’s always something new to learn. However, following these basic rules of thumb can go a long way to helping you get where you want to go financially speaking.
If you’d like to find out more about saving money on commissions, fees, taxes and other hidden costs, please request a complimentary copy of our 9 page guide, “Keeping More of What’s Yours Already”. Just send us an e-mail by clicking here. Please type “Keeping More” in the subject, and leave your name and address, we’ll send you out a hard copy promptly.
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