In a world of uncertainty, there are a few things you can count on. One is that the stock market will continue to go up and down, and the other is that you’ll be paying taxes. So here’s some advice on how to make sure your money works for you this year by investing in the best stocks!
Find the Right Stock
The simplest way to invest is to buy a mutual fund, which pools the money of a group of investors into a single investment vehicle. But how do you find the right mutual funds that will meet your needs?
First, it’s important to understand what you’re investing in. Your mutual fund is a bundle of stocks. So before you buy any mutual fund, you need to know exactly what you’re investing in. That means you need to know the mutual fund’s name, the ticker symbol, the net asset value (NAV), and what each company owns. If you’re not a financial expert, start here.
Several other services exist to help you research a mutual fund. However, the most popular is Morningstar.com. It offers an informative platform that compares mutual funds side by side.
Know Your Risk Tolerance
There are a few things that you can do to reduce your risk of losing money in the stock market. One way is to limit the amount of money you invest in the stock market. Another way is to find stocks with strong growth prospects.
These stocks will not only pay you better dividends but may also outperform other stocks if the overall market does well. For example, if you invest in stocks with a growth rate of at least 8 percent over the next three years, you could earn an average annual return of 12 percent over that period.
Invest for the Long Term
There’s nothing more frustrating than trying to figure out how much your investments are worth. For example, how can you figure out the value of a stock that has increased in value by 50%? Or a bond that has lost two-thirds of its value over a year? These kinds of changes make it hard to figure out whether your investments are worth as much as you paid for them.
But no worries! The truth is that you don’t need to have an expert review the value of your investments every day to make sure that they are being properly valued. All you need is a little knowledge, and you can turn any investment into a great investment.
So how do you figure out how much your investments are worth? The first thing to do is to write a list of your investments.
Diversify
One of the most popular ways to invest is the classic “buy and hold” approach. But what if you don’t want to own the same stock for the next 20 years? Or don’t you have the time to manage your own money?
If you’re willing to take on a little risk, then you can start diversifying your portfolio now to help reduce your volatility. There are many ways to do it, but the simplest way is to invest in a low-cost index fund such as Vanguard Small-Cap Index Fund Admiral Shares or VSMAX that fits your long-term investing goals.
For a little more excitement, you can invest in exchange-traded funds (ETFs). These funds mimic the performance of a particular stock or sector with some or all of your money.
Conclusion
Over the long-term, investing in the stock market can help you reach your financial goals, give you an early start on saving for your children’s college education, and provide additional income for your household during retirement.
Even the most ardent bears (I know a few) admit that the stock market will continue to rise.
I have some big news: you don’t have to be an expert stock market investor to reap the benefits.
Just follow these five simple, effective strategies, and you’ll be on your way to financial freedom!