Tips for Successful Do-It-Yourself Investing
Posted on December 20th, 2009
Over the past ten years, the investment world has changed dramatically and it has become easier and easier for investors to put together portfolios on their own and manage their investments on their own. A lot of investors have great success investing from the comfort of their home at times convenient for them but many people attempt to invest on their own and quickly realize that they’re in over their heads.
The last two years have been some of the most challenging years for investors in history and if you managed your portfolio successfully through those years, you can probably handle just about any market environment. As you decide whether or not you’re a good candidate to manage your own investments, here are some tips that might help.
Be Honest: Do-It-Yourself investing is not for everyone and like anything else, it’s important to know your limitations. Your money is not something that should be taken lightly and if you lack the knowledge or expertise to understand the basic fundamentals of investing, you can find yourself in trouble very quickly. If you have a basic idea of how investments work, what types of investments are available and appropriate for you, a reasonable expectation of fees and commissions, and knowledge of basic concepts like asset allocation and diversification, then you might be a good candidate to invest on your own.
Be Practical: How much time do you have to monitor your investment selections? When you invest on your own, you’re the only one watching for buying opportunities or signs of trouble in your portfolio. If you don’t have time to follow the market closely, a diversified ETF or mutual fund is probably the best way to go. For some people with limited time or interest, working with an investment profession is a better choice for making sure your money is taken care of.
Be Prepared: Investment decisions are not easy to make and it takes time to thoroughly research the right mix of investments for you. There are several different types of online calculators and research tools that are designed to help you make investment decisions. Even after your portfolio is in place though, you should plan to spend at least a few minutes each day and a few hours each week keeping an eye on the performance of your portfolio.
Be Realistic: One of the problems encountered by many investors trying to make decisions on their own is that they have unrealistic expectations of either their ability to select investments or of the market’s ability to provide returns. It’s tempting to buy the hot stock or look for tips that just can’t miss but stocks can go down just as easily as they can go up. If you’re trying to get rich quick by playing in the stock market, it can be a dangerous game. Successful investing is much more likely to be a consistent series of small victories instead of a quick windfall and understanding that will help you to keep your expectations in line with reality.
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