Life-Time Rules for Investments
1. Learn the Basics of Long-Term Investing
Begin with setting aside cash at least two to six months’ living expenses and an emergency fund that will be available in the event of illness or a period of unemployment. Then commit yourself to regular investing, so that you and your family will have enough later.
2. Get Started Now
Every year you put off investing make accomplishing your ultimate retirements goals even more difficult. As a rule of thumb, for every five years, you may need to double your monthly investing amount to achieve the same retirement income. Pension Plans alone are not enough for a comfortable retirement.
3. Know Yourself
Understand yourself as an investor: your emotions, your fears and your tolerance for risk. Make sure your choose investments that you’re comfortable with and that are appropriate for your long-term goals. For some investors, particularly those with large or complex portfolios who want ongoing investment management, the services of a fee-compensated financial adviser may be appropriate.
4. Invest for Growth
Invest in stock, either individually or in mutual funds for long-term growth. In any given year, stocks can be more volatile than other investments, but over time, stocks have typically outperformed all other types of investments while staying ahead of inflation. Stocks should be the core of a long-term investing strategy.
5. Buy and Hold Works
Take a long-term view always. Patience is a virtue. Maintain the discipline to hold or add to appropriate investments through down markets as well as up markets.
6. Build a Diversified Portfolio
In deciding how to allocate your assets, be sure to diversify, both among asset classes and within each class. Diversify among assets can be with stocks, CDs (bank deposit), bonds, precious metal, real-estate. And within each class means you should select different sectors (industries) to buy the share for your portfolio. Choose an appropriate asset allocation model. Doing so can spread risk over a variety of investments and may provide more consistent and reliable outcomes.
For many investors, broad-based index funds are an excellent investment strategy. Index funds are a sound, low-cost choice for a core holding designed to track the market’s performance.
7. Consider Bonds (FDR) and Cash for Diversification and Income
Bank deposits, bonds and cash can play important role in an investor’s portfolio, providing solutions for income and diversification needs. But to achieve your long-term growth objectives look to stocks and stock mutual funds.
8. Minimize Your Expenses
Over a long run, sales charges, loads, commissions and high expenses can drag down the performance of even a well-diversified portfolio. Reduce your investment expenses by using no-load funds, low-commissioned stocks and tax-efficient mutual funds. A buy and hold strategy can minimize the impact of capital gain taxes.
9. Stay on Track
Don’t review your portfolio daily or weekly, but review your portfolio at least once a year and definitely whenever personal circumstances change. You’ll need to evaluate the performance of your investments against relevant risk-adjusted benchmarks and when necessary to re-balance your portfolio to stay on track with your long-term financial goals.
10. Become a Life Long Investor
Investing for growth shouldn’t stop when you retire. To make your money work for your throughout your retirement years, keep investing a portion of your portfolio for growth. Don’t automatically shift all of your money into fixed income and money market investments too early.
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I don’t know much about the stock market, but I’ve been out of a job for a while, too, but I’ve had a few freelancing jobs, so I say I’ve been "working from home" as an editor/writer. Maybe you could say something similar, except dealing with stocks? Good luck.
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