The Basics Of Making Wise Investments Never Change
Smart investing helped me reach financial freedom. So, I want to share my best investing tips.
These tips have generated solid long-term investment returns for me and many other good investors. Most importantly, stick with me to the end, where I will show you how these smart investment tips will turn a little of your money into a lot!
Let’s get moving.
Easy Investing Tips for Beginners
Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.
1. Think Long Term
First, refrain from investing if you want to get rich quickly. However, on a positive note, a combination of dividends, rents, and capital gains can easily achieve annual investment returns of roughly 10% over the long run.
But remember this point: Investment values can decrease, sometimes by a lot in the short term. For example, I’ve been invested and stayed invested during the following times of economic turmoil:
- 20% stock market drop on black Monday in 1987
- The bursting of the Internet bubble in 2000
- 2007-2008 banking, real estate, and financial crisis
- The pandemic-induced collapse of 2020
So, having a long-term mindset is critical to staying invested through difficult times. Successful investors make the most money at that time, precisely when there is panic among the masses.
Finally, what is long-term? I suggest at least five years. However, in my case, it’s a lifetime of making long-term investments.
Related reading: 7 Smart Financial Goals to Make the Most of Your Money
2. Determine Your Investment Objectives
Knowing why you desire to invest is essential to cultivating a long-term mindset. Thus, you must understand your investment objectives.
Some possible objectives for investing include the following:
- Long-term wealth accumulation
- Participating in the stock market
- Financial freedom at a young age
- Supplementing cash flow with dividends
- Financial planning for retirement
Thus, what’s your why as a beginning investor?
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3. Adopt An Investing Strategy
Understanding your investment objectives makes selecting an investment strategy easier since not all investing strategies are created equally.
I classify investment strategies into three different buckets as follows:
1. Higher income but lower growth potential for conservative investors.
2. Higher growth but lower income for more aggressive investors
3. Growth and income for investors seeking a balanced portfolio.
4. Choose Your Investments Wisely
Having a preferred strategy makes choosing investments easy. For example,
Conservative investors should focus on certificates of deposits, money market funds, and bonds.
Aggressive investors should focus on stocks.
Real estate is a good addition to any investment portfolio through your primary residence or a rental property.
Furthermore, stock investing is simplified by choosing index, exchange-traded, or mutual funds.
Finally, I prefer dividend stocks for the balance between growth and income they provide. I recommend this excellent resource to learn about dividend investing:
The Financial Freedom Investing Course
5. Invest Regularly
From investing tip #1, we know a long-term investment horizon is vital. However, short-term thinking also comes into play.
Specifically, invest money regularly.
To do so, I believe in dollar-cost averaging into stocks. Thus, I allocate money monthly for stock investments since one of my goals is to invest monthly.
Okay, we are halfway done. So, let’s keep moving. And be sure to save this Pinterest pin so you can return to this post later.
6. Diversify Your Investment Portfolio
I often get this question: what is the optimal number of investments to own?
My answer is: Hold enough investments to provide adequate investment diversification. But not more than you can effectively monitor and manage.
Thus, the correct number of investments will be different for each investor. For example, one stock market exchange-traded fund and one rental property may provide enough diversification.
Furthermore, a good rule of thumb for anyone interested in investing in individual stocks is to hold between 20 and 30 high-quality companies.
One of my mistakes as a young investor was holding too many stocks. As a result, I had more companies than I could effectively monitor. Furthermore, many of my stock positions needed to be larger to make a difference in my investment returns.
Must read: Best Investments for Beginners
7. Use Consistent Selling Criteria
How do you decide if and when to sell an investment?
By following the investing tips we have discussed thus far, hopefully, you can buy your investments and hold them forever. However, even the best investors make mistakes and need to sell sometimes.
I mainly sell investments that no longer fit my investment strategy. For example, as I have gotten older, I have shifted from aggressive investments to conservative ones.
As a result, sell decisions are more manageable when you have clear investment objectives and an investing strategy.
8. Learn As Much As You Can
The more you know about investing, the better investor you will become. Thus, learn as much as you can.
Be smart. Know what you are doing and understand where you are putting your money.
Once again, I will mention my favorite investing course since I mainly focus on dividend investing for passive income from dividends.
The Financial Freedom Investing Course
The course content is perfect for building your passive income stream from dividend payments.
9. Consider Alternative Investments
Lastly, putting all your eggs in one basket is rarely a good idea. As you gain experience as an investor, consider other asset classes to balance out the ups and downs of individual investments.
Depending on your age and financial situation, alternative investments, such as commodities, land, cryptocurrencies, or precious metals, can be a good idea.
How To Turn A Little Money Into A Lot
For investors like you and me, small amounts of money can make a big difference in our finances. For example, by saving and investing as little as $50 per month and earning 10% annual investment returns, you will end up with $5,000 in about six years.
Conversely, you can choose to do nothing and end up with nothing.
The choice is yours. For my money, I choose to invest regularly.
Okay. That’s a wrap. Please allow me to offer some concluding thoughts.
Simple-Smart Investing Tips for Beginners
Good investors exercise discipline. They understand the basics of investing and consistently apply the tips discussed today.
Here are the 9 investing tips for beginners:
- Think long term
- Determine your objectives
- Adopt an investing strategy
- Choose investments wisely
- Invest regularly
- Diversify your investments
- Use consistent selling criteria
- Learn as much as you can
- Consider alternative investments
Finally, best of luck with your investments! And before you go, save this to your favorite Pinterest board:
Author Bio: Tom Scott founded the consulting and coaching firm Dividends Diversify, LLC. He leverages his expertise and decades of experience in goal setting, relocation assistance, and investing for long-term wealth to help clients reach their full potential.