Whether you’re new to investing or a market veteran, these time-tested tips can help you build your fortune.
Rule Number 1: Diversify
Since some investments zig when others zag, divvy your money across several investment categories, from stocks to bonds to real estate. Also diversify within categories. Diversification spreads risk and guards against a catastrophic decline in any one investment.
Rule Number 2: Rebalance
Review your portfolio yearly to make sure your mix of investments hasn’t strayed from your original goals. If it has, sell investments that have performed well and use the proceeds to invest in underperformers to regain balance.
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Rule Number 3: Dollar-cost average
Fear can cause investors to miss buying opportunities when prices are low. Euphoria can cause them to buy high. By investing the same amount in the same investments on a regular basis, dollar-cost averaging takes emotion out of the equation.
Rule Number 4: Keep costs down
You can’t control how much your investments earn, but you can control how much you pay to invest in them. Save by using an online discount broker, and stick with low-fee index funds and actively managed no-load funds.
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