Investing shouldn’t be risky business:
Invest wisely and responsibly
For the amateur investors amongst us, here’s a news flash: The odds of you stumbling upon and investing in the next Facebook are as probable as Kanye West or Paris Hilton becoming president.
It’s natural for new investors to want to take a leap of faith and invest in what seems like the next big thing, but all that glitters isn’t gold. Hedge fund managers and venture capitalists have a tendency to encourage investors to bet on the newest and sexiest ideas on the market and that may be enticing. But for every Tik Tok, there’s a Dubsmash, and like Dubsmash, the thousands of dollars you invested can disappear just like that.
All the feels (but not the good kind)
Remember Von-Dutch hats? You loved them for the short (but awful) period when they were in fashion, but thankfully they went out of style as quickly as they became in style.
So what does fashion have to do with stocks? There are lots of what we call emotional investors who eagerly invest in “trendy stocks” that they aren’t necessarily familiar with, forgetting that trends are trends for a reason. This principle is reflected in a Black Rock study which showed that the average retail investor typically received returns that were less than inflation.
Tech is probably one of the most popular fields when it comes to emotional investing, as more and more young entrepreneurs become convinced that they’re on their way to discovering the next Bumble. The truth is, you’re as likely to spot the next Bumble as you are to find a serious relationship on Bumble.
Boring never sounded so good
Responsibility isn’t a four-letter word, but you know what is? Debt. Before you even consider investing your money, make sure that your credit card debt and student loans are paid off. Start by paying off your debt with the highest interest rates and once you’re done, invest away. But being responsible doesn’t end there. When you’re jumping into the world of investments, don’t rely on the luck of the draw or unnecessary risks magically taking off.
Instead, look for opportunities that have little to no investor involvement and provide stable yet steady returns.
Diversity is always a good thing:
Diversify, diversify, diversify. You’re probably familiar with the phrase “don’t put your eggs in one basket.” The same goes for your investments. Take advantage of the different types of investments that are available to you. For example, employer-retirement plans give you access to a range of different stock options which offer attractive returns. When we say attractive we’re talking more than $130,000, at a rate of 8% over eight years.
Finding balance shouldn’t just be a thing you look for in yoga or pilates. It’s a philosophy that should guide your investment decisions. Divide investments between high-risk options and low-risk options like Gov’t secured bonds ensuring that no matter what happens, you’ll be financially secure.
Adult now, rest later:
Started putting money from your monthly salary aside? Congratulations you’re officially adulting.
This might come as a shock to you, but cutting back on those Jamba Juices and putting money each month into an exchange-traded fund or index fund, can help you buy a home or get married down the line. ETFs which are becoming increasingly popular can be easily accessed and procured through major banks, trading sites and robo-advisors.
Thanks to recent legislation like the Jobs Act, millions of retail investors now have access to alternative investments ranging from real estate to commodities, to specialty finance. These kinds of investments are not only safe and reliable but offer single to double-digit returns.
Bottom line:
Fast and furious is good for the movies, but when it comes to investments, slow and steady may very well help you win the race.
