Investing Like an Expert Without Risking Your Future

Daniel Penzing
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Read a Few Good Investment Books

Here’s my suggestion. Look for web sites of investment gurus who write investment books and learn from what they have to say about investing.

Look for web sites that style themselves “Learn to Invest like an Expert” and learn the principles that successful investors use. In a nutshell, these principles are:

  • Buy and hold for the long term. When it comes to investing, the long term means for at least ten years.
  • Buy for a reason and don’t buy just because something looks cheap. Don’t buy because the commercials tell you buy.
  • Buy stocks of companies that you understand and believe in.

In all cases, the following questions should be asked:

  • Is the company doing well today?
  • Is the company doing better than its peers in its industry?
  • Is the company doing better than the competition?
  • Is the company doing better than it did last year?
  • Is the company in a hot industry or not?
  • Is the company stopping growing, holding steady, or dropping?
  • Is a new competitor entering the market or not?
  • Is the market moving up, down, or sideways?

When In Doubt, Invest in Index Funds

Indices have become one of the best ways of gaining financial rewards without having to place too much at risk. It is the option of choice for investors requiring a high level of consistency. Very few of the risk-averse will outright reject investing in index funds. They are relatively low cost investments that are designed to give you exposure to a particular group of stocks, bonds, or other investment vehicles.

Index funds can be highly appealing and potentially rewarding because return is typically low-risk, low-cost, and easily distributed. This makes it an attractive option for people wanting to maintain a diversified investment portfolio.

You can choose from different index funds in a variety of industries within mutual funds. This appears to be a split, but it is actually safe and popular. There is less risk, and you invest in different industries. This ensures that you will make a large amount of money, no matter what industry is doing well and what one is doing poorly.

You can construct an index fund at ANY time. You just need to purchase the index funds via your brokerage account. And then, you have to contribute monthly to the fund to build up your money.

The dividends are then paid out and applied to your index fund. This is a great way to get an interest on your money that is valued by the stock market. You can set it and forget it, and the dividends will roll over to the next month.

Invest for the Very Long-Term

The dividend yield on the average stock listed on the NYSE in 2000 was slightly more than 2%. At the time, that yield was considered modest, but in a period of low inflation and low returns on cash, it wasn’t so bad. Today, those same stocks are yielding close to 2% again.

The lesson is this: It doesn’t take much to significantly increase your income. And if you do nothing else, never stop reinvesting your dividends.

Based on that, here‒s what I suggest you do:

➢ Stay invested, regardless of the state of the market. If you have a good stock or bond fund, it will rebound eventually. Never let fear get the better of you.

➢ When you’re ready to reinvest those dividends, buy more of the funds that have provided the best returns.

➢ If you absolutely have to access your hard-earned cash, take the money only when you need it. But try not to do that, either.

Avoid the Technology Trap

One of the most common investment mistakes that amateurs make is investing in companies that have future tech prospects. This is known as buying a company with the hope that they’ll be able to create new products or change a market. It might seem like a good thing to invest in the company that will be behind the next wonder product or the next must-have service, but these types of investments are inherently risky.

The problem is that tech companies are really good at leveraging investors who are willing to gamble – and the consequences to these investors can be huge. It’s like betting on a horse at the racetrack. If you pick the wrong horse, your losses increase with every race.

If you’re a tech expert, that’s great! Even if the market turns against you and the company dries up, you’re more likely to know about it when it does. And, you’re probably more likely to find better investments than a new tech-based startup. But, if you’re not a tech expert, don’t be scared away. As with all investments, you can succeed in tech. Just pick companies with fantastic fundamentals rather than sensational future prospects, and you’ll have a much safer foundation.

Grow Your Salary

Not your Collection.

So your earning a pretty penny at the moment – very good. That said, you might want to think about how long you can sustain your current salary. If you are really agile, then you might be able to improve your earning by 50 to 100 percent before you are facing a job loss.

But there is a trick with investing that you can use to grow your capital and income together. It’s called dollar-cost averaging. Dollar-cost averaging is a type of investing technique that allows you to purchase shares at regular intervals.

What are the pluses? The idea is to buy shares at a low price, because more shares will be purchased than you normally would. This method will also help prevent the emotional value that you place on particular stocks. Growing your income is more important at that point.

Keeping the emotional aspect of investing steady will also help you from making emotionally based decisions.

Don’t be afraid to make mistakes. It’s better to lose your money than you life savings.

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Never Keep All of Your Eggs In One Basket

There is a lot of risk involved with investing your money.

No matter how safe an investment may be, there is always a chance that it will don’t turn out the way you had hoped.

But that’s not because investing is inherently risky – it’s just because the stock market is only a best guess.

There are many reasons (e.g. emotional, political) that could cause the stock market to rise or fall in any particular moment. No one is prepared for all of those situations. That is why it’s important to keep good financial habits and diversify your investments.

Investing requires making choices. When you invest in one or two stocks, you are basically putting all your eggs in one basket. That can definitely be useful, but it’s risky.

So, instead of investing everything you have in one stock (or a few stocks), you should make a plan to diversify your investments.

Remember: never keep all your eggs in one basket!

Diversification Will Let You Earn without Taking Big Risks

There are several different ways you can increase your diversification.

Instead of investing solely in stocks, you could also invest money in bonds, real estate, and commodities (like gold and oil).