While investing does not necessarily fit the mold of a typical video game, many investors still love to level up over time. In this post we will explore some actionable tips and popular strategies for you to elevate your investing skills.
Get to know the fees.
Many people think that investing is complicated and reserved for the rich. But it doesn't have to be that way.
The first step is to understand what fees are charged on your investments. This will help you know how much money you're paying in fees, which can eat away at your returns over time.
Here are some key points to consider:
Fees vary widely across investment options. In general, index funds charge lower fees than actively managed mutual funds, but there are plenty of exceptions. And some mutual funds offer "no-load" funds with no upfront charge, whereas others charge an upfront commission known as a load.
A fee is typically expressed as an annual percentage of the amount of money under management in your account. If you have $100,000 invested in a fund that charges 1% annually, that translates into $1,000 per year in fees — regardless of whether the market is up or down during the year.
Fees may be waived if you meet certain criteria (such as having a minimum amount invested). However, even when fees are waived they still count toward the total cost of investing because they reduce your potential return on investment over time.
Understand your risk tolerance.
If you’re a first-time investor, you probably worry about making the wrong move. You may be afraid that you won’t pick the right stocks or funds. Or maybe you’re worried that you might lose all of your money if the market crashes.
The truth is that investing can be intimidating, but there are strategies available to help make it easier.
Here are three tips you can use to level up your investing strategies:
Understand your risk tolerance. It’s important to know what your risk tolerance is before putting money into anything. If your investments lose value, will it affect your overall happiness? Will it stop you from being able to pay off debts or save for retirement? Would it cause stress? If so, then those investments may not be right for you.
Review your goals and objectives. Before investing in anything, take some time to ensure that you know why you need the money and what purpose it will serve once it’s in place. That way, when things go wrong — as they inevitably do at some point — you won’t panic and sell everything at a loss or cash out early because of fear rather than reason.
Diversify, diversify, diversify.
Investing is a lot like cooking.
You need to have a plan for what you're going to do, but you also have to be flexible enough to change course when the time comes.
If you've never invested before or if you're just getting started, it's important to understand that there are no guarantees in investing. You can't expect every investment to go up in value and there will be times when an investment drops in value.
Diversification means having more than one type of investment so that if one loses value, another may still be profitable or at least not lose as much money as the first one did. For example, if you owned only stocks in your portfolio during the financial crisis of 2008-09, chances are they lost significant value — but bonds held their own or even increased in value during that period because they were less risky than stocks (and thus less volatile). When looking for diversification, look for investments with different risk profiles so that if one does poorly, another may perform well enough to offset the loss and keep you on the up and UP!
Explore all your options.
This is one of the easiest ways to get started, and it's also one of the most effective ways to increase your long-term returns.
If you have any money left over from your savings or other investments, consider using it to buy stocks. This will give you a small amount of exposure to the stock market, which helps in case you decide to go all-in on stocks later on down the road.
You can also use this money to start investing in bonds or mutual funds. These are two great options because they are both low-risk investments that offer decent returns over time. With bonds, you're more likely to get back some of your initial investment than with stocks, but with mutual funds, there's less risk involved since they're pooled together with other investors' money into one single entity called "the fund."
Pay attention to trends.
Investing is a game of trends. The best way to play that game is to understand what makes money move and how the market works.
In the financial world, trends are often driven by emotion. If people are scared or excited about something, they'll buy it. When people want something, they'll do whatever it takes to get it — even if that means paying more for it. That's why investing in companies with strong brands and loyal customers is so important.
Trends can also be driven by human behavior: For example, when someone sees an opportunity for profit, they'll jump on board without thinking about whether the trend will last or if there's another better option. It's only when things start to go south that people start asking questions like "What happened?" and "Why did this happen?" These questions reveal where the industry may be heading next and what you should do next time around.
There are a number of ways to think about investing. At the most basic level, money is just a way to keep score. You can make it by working hard and playing by the rules, or you can do that and also take an educated guess as to what will happen in the future.
The best way to earn money is not necessarily the way that makes you feel good. The best way to earn money is the way that will make you rich.
Think long-term. This may sound obvious, but it's often easy to get so caught up in day-to-day life that we forget what matters most: building wealth over time rather than in a flash of inspiration or a rush of panic. It's easy to get bogged down trying to figure out how much money you need for retirement — but if you're not saving for one year at a time, then how will you ever see your life goals realized?
Investing doesn’t have to be as complicated as it seems.
Just like any other profession, investing takes skill, experience and talent. The more knowledge you gain from books or from professionals, the better investor you will become. Most importantly, it’s not about having the best strategy or being the most knowledgeable person in the room. It’s about using your intuition to recognize great opportunities. Level up and get started in investing today!