Treat your investments like a business – you may feel that you are a small investor with too small an investment to really matter in the big scheme of things. You may feel that your vote does not count for much. While on a percentage basis this is true, it is your money that you are investing and your investment should meet your business goals for investing. Long term investments that pay regular dividends in a company that has long term prospects and is well managed are just a few of the business issues that investors need to consider.
Compared to GIC’s, bonds and other fixed interest rate return types of investments. Consider that bonds are paying a very low percentage interest income at this time, while inflation is also low. In fact once you take into account your tax situation on the income and inflation you are probably losing money if you are invested in fixed income securities. Sure there is risk with stocks, but well managed companies with dividend income have a tendency to do better than the inflation rate!
Volatility is not risk, it must be managed – short term vs. long term – many investors are worried about volatility. It is only an issue if you sell when the stocks are declining. Invest for the long term and ride the wave. It will be volatile but the trend is usually generally up ward as many stock charts will show. Assess if you will need the money in the short term. Can afford to lose any funds? If not you probably should stay away from any volatile investments.
Start investing early in your life, focus on companies that you understand and have long term prospects. Focus on companies that are well managed, that pay regular dividends and have a history of increasing their dividends on a regular basis. Look for companies that paid their dividends during economic down turns.
Watch the fees from transactions and management fees – if you trade often, the fees will add up over time and cost you a good deal of money. The same applies to management fees for managing mutual funds or for managing your portfolio. Pay for value and pay for results.
Warren Buffets Financial Rules are part of a larger strategy that each investor should consider and personalize for their situation.
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