Five Dos’ of Investing
1. DO Track All the Things!
One of the challenges that most people face is simply tracking their spending and saving. Create budgets for you to help you achieve your short and long-term goals.
2. DO Keep an Emergency Fund for 6 Months of Expenses
One of the best things you can do for your financial well-being is fortunately also one of the simplest: Save enough money to cover your expenses for 6 months. Now that you know how much you spend per month you know how much you need for a half year with no income. No one ever expects to be out of a job, have a major medical expense, or some other emergency, which is exactly why you need to start preparing and saving today.
3. DO Invest Early and Often in Low-Cost Investments
Invest early, invest regularly. Early investments lead to compounding returns. The time value of money increases over a period of time. Regular investments made right from an early age can reap huge benefits at the time of retirement. Moreover, early investment facilitates your entry in the world of finance early.
4. DO contribute at least 10% of salary to your Retirement Plan
The goal of retirement planning is to achieve financial independence. The sooner you start contributing the better. Even if you feel your salary is low in your 20’s or 30’s, the power of compounding interest means that your money will often grow faster than higher income individuals who don’t start contributing until their 40's
5. DO Open A Health and Protection Plan.
Health Insurance is necessary for every individual, keeping in mind the rising medical costs and a spurt of lifestyle diseases. A medical emergency can attack anyone, anytime and impact an individual emotionally and financially. Also, a low-cost term plan will help you provide protection to your family in your absence, ensuring their financial security.
Five Don’ts of Investing
1. DON’T Buy and Sell Stocks Frequently
This couldn’t be more untrue. You can’t “time” the market and you’re much more likely to hurt your returns than help them by trading on a weekly (or more frequent) basis. The likelihood that you’ll be able to pick individual stocks that beat the overall market is incredibly low.
Plus, with this strategy, you won’t be diversified
2. Don’ts Put All Your Eggs in One Basket
One of the quickest ways to get yourself into financial trouble is to focus a significant portion of your net worth in only one investment. Whether it’s a speculative fixer-upper, a friend’s business, or a too-good-to-be-true, once-in-a-lifetime opportunity, avoid trouble by diversifying.
A safe rule of thumb is to never put more than 20% of your net worth in any one investment.
Diversifying not only mitigates risk but if done right, can also increase your net returns in the long-run. As one sector or type of investment declines, another in your portfolio will thrive.
3. Don’ts Check Your Investment Performance Every Single Day
Finances are very emotional. If you’re following the stock market and your account balances on a daily basis, you’ll be riding a roller coaster of ups-and-downs that not many people can handle. Find a cadence of checking the investment performance that works for you. It is recommended to view every 2–4 weeks as a good place to start.
4. Don’ts Live Beyond (or even at) Your Means
So, you just got a promotion or a raise, great news! But, instead of upgrading your car or your rental apartment, put it towards a longer-term financial goal. Don’t spend more than you earn. It’s harder than it sounds.
5. Don’ts Take on Debt You Don’t Have To
In a good economy, debt is very easy to acquire. Take a minute to think of the debt you have today: Student Loans, Credit Cards, Car Payment, Mortgage. The list goes on and on and on. One of the best things you can do for your financial health is to avoid taking on this debt at all costs.
Instead of trading in your older car for a new lease, fix it up and stretch it for a few more years.
Instead of buying a new wardrobe, pay more towards your credit card bills.
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