Investing takes more effort. Knowing and believing in what you invest in is key. Understand the fundamentals, drill down to the numbers. Remember, smart investors use their money to acquire things that offer the potential for profitable returns, either through interest, income, or the appreciation of value. Thanks to modern technology, the investing world offers enormous possibilities to anybody with a few bucks and an Internet connection. The most important factor in being a successful investor is not the stocks and funds you pick. Successful investing depends on:

  • Proper asset allocation – the overall mix of bonds, stocks, and cash you hold
  • Avoiding making rash and emotionally charged decisions (like selling at the bottom of a market crash). To avoid this, set-up an automatic investment plan (monthly is the most common method)
  • Stopping yourself from buying and selling different investments and
  • Investing in funds that aren’t constantly trading.

However intelligent and rational we are, eventually our emotions will always get the best of us.  You must remove human behavior.  Your goal is to create a broad diversification through a mix of low-cost mutual funds, Stocks and ETFs

1- Account Types (Retirement, or Taxable): First, you will need to choose whether you’re investing in an individual retirement account (IRA) or a general, taxable account. An IRA or Roth IRA provide certain tax advantages as an incentive to save for retirement. The downside is there are limits on how much you can contribute to the account each year and when you can withdraw the money. If you’re new to investing and can afford to begin putting money away for retirement, begin investing with a Roth IRA. Brokerage account (taxable): If you already have a retirement account or need to invest money for another goal (like buying a home or starting a business), a regular brokerage account will do. Keep in mind that your capital gains – the money you earn when you sell a security for more than you paid for it – are taxable, as will certain dividends you receive.

2- Your investments This is where it gets overwhelming. I stated before, stick with mutual funds or exchange-trade funds (ETFs) rather than individual stocks and bonds until you get your feet wet. Funds enable you to invest in a broad portfolio of stocks and bonds in one transaction rather than trading them all yourself. Funds are not only safer investments (because they’re diversified), it’s often far less expensive to invest this way because instead of paying trading commissions to buy a dozen or more different stocks you will either pay just one trading commission or nothing at all (in the event you buy a mutual fund directly from the fund company).

Quick guide to follow:

  1. Open a 401(k)/IRA, a brokerage/saving account.
  2. Mutual Funds ( is my favorite; their fees are the lowest): For starters, pick few low-cost mutual funds that track the overall market(s) typically called index funds. When you get comfortable, search by sector, industry, etc.
  3. Stocks (do your research, know what’s trending, fundamentals are important): Buy stocks that will hold their value even during a downturn.
  4. ETFs (Exchange Traded Funds); they’re like a combination of stocks & bonds
  5. Allocate assets in Bonds (be careful they’re interest rate sensitive)
  6. Certificate of Deposit (CD) are safe and tiered investments. Choose what fits your situation. The yields are higher the longer you keep your money invested
  7. Invest consistently, regardless if the market is up or down
  8. Diversify for your age and investment goals
  9. Re-balance your portfolio annually

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