Tips To Invest Your Money Wisely
Avoid Individual Stocks
“Know what you own, and know why you own it.” – Peter Lynch
Do your homework before making a decision. And once you’ve made a decision, make sure to re-evaluate your portfolio on a timely basis. A wise holding today may not be a wise holding in the future.

Never Invest In Something You Don’t Understand
If you can’t clearly explain what you’re investing in to someone else so they can understand it, then you don’t need to invest in it.

Invest Pre-Tax and Tax Free Money First
Investing Pre-Tax money- This simply means you’re investing in an IRA, 401k, 403b, or other retirement account. Therefore, every dollar you invest in one of these accounts is not taxed as income, so you will save money on your income taxes for now. However, you will pay taxes on money you withdraw later during retirement.

Concentrate on long term results
In the end, what counts in investing is what you pay for a business – through the purchase of a small piece of it in the stock market – and what that business earns in the succeeding decade or two.
Once you’ve put the first 3 tips into practice it’s important to remember that tremendous value is most often gained over the long term. Look at what might happen over the next 15-20 years and invest accordingly.
You’ve got your cushion so you’re not afraid of dips in the market. You’re working within the bounds of what you understand well. You also have the ability to operate calmly when the rest of the world has gone nuts.

Investing doesn’t have to be complicated!- 11 Tips to Invest Your Money Wisely.

“The stock market is filled with individuals who know the price of everything, but the value of nothing.” – Phillip Fisher
Another testament to the fact that investing without an education and research will ultimately lead to regrettable investment decisions. Research is much more than just listening to popular opinion.

Don’t Be Too Conservative11 Tips to Invest Your Money Wisely
The opposite of taking too much risk (i.e. individual stocks) is to be too conservative when you invest. Keeping all of your money in a money market account or CD’s (Certificates of Deposit) is a terrible way to invest your money!

Yes, these investments are very safe, but they have a very low return on investment. The returns are so low that they don’t even keep up with inflation, so you actually end up losing money over time with these lackluster investments.

Seek Wise Counsel- Pay a Professional
It’s always good to seek wise counsel about your investments from a professional such as a financial advisor or financial planner. You should seek out a pro who charges a flat fee or by the hour. Hiring a financial planner that takes a percentage of the money you invest as compensation will put a huge dent in your investment returns. Ultimately that will cost you tens of thousands (or more) over the long term.

A great financial planner will have the heart of a teacher and make sure you understand everything about what you invest in.

Here’s a great article from my friend Jeff Rose of Good Financial Cents on how to hire a great financial advisor.

Be Patient With Your Investments
After 20 years of investing, I’m finally starting to learn to be patient with my investments. Remember that investing is a marathon, not a sprint. It’s totally normal for the value of your investments to go up and go down over time. But as time stretches on, they will almost always go up in value. So be patient if your investments are not performing very well right now.

Don’t think about your investments in terms of how they are doing today, or the last 6 months, or the last year. Think about your investments in time spans of 20-30 years or more. Taking a long term view helps you keep things in perspective.

KISS Your Investments
You’ve probably seen the acronym before. Using the KISS (Keep It Simple Stupid) philosophy is simply wise investing. There are a lot of complicated investment strategies where people will try to convince you that you can beat the market.

Those almost never work.

If they do, they don’t work for long.

The best investment strategies are very boring, but they work like a charm. The simplest method is to invest in index funds that match the returns of the market as a whole. Another simple strategy is to invest equal amounts in mutual funds covering 4 different categories:

Growth
Growth and Income
Aggressive Growth
International

Watch The Fees
Investment fees can eat you alive if you’re not careful. There are several fees you need to be aware of:

Transaction Fees- The fee charged every time you buy or sell shares of an investment. These fees are generally pretty low.
Front End Loads- Some mutual funds charge a fee as high as 5-6% of the total amount invested to purchase shares of that mutual fund.
Annual Fees- A fee charged every year you own shares of a mutual fund. These investment fees have a very wide range from as little as .2% up to as high as 5-6%.
Fees can be really insidious. Every time you pay an investment fee, that’s money that does not get invested and never has a chance to grow. Obviously, the more investment fees you pay, the more investment growth you give up over the long term. High fees can literally cost you tens to hundreds of thousands of dollars in investment returns over your lifetime.

Keep Your Emotions Out of It
TV shows and the internet like to portray investing as an exciting, fast moving game of hot stock tips and frequent trading. The reality is that good investing is actually very boring.

It’s almost exciting as watching paint dry.

Don’t check your investments every day. For that matter, don’t check them every week or every month. Maybe check them once every quarter.

When you constantly check your investments and see the day to day movements in price, it’s way too easy to get your emotions involved. You end up making bad investment decisions based on an emotional response. Again, I know this from personal experience.

Stay Out of Debt
You really didn’t think I’d forget about this one, did you? If you have no debt, you have more money to invest. The more money you invest, the more opportunity you have for your investments to grow into a huge pile of wealth!

If you want to get out of debt, you can check out my Celebrating Financial Freedom online course here (every reviewer has given it 5 stars!)

Investing Doesn’t Have to Be Complicated
Most people think of investing as a complicated process that they will never understand. But if you learn the basics above and stick to them, investing your money will be a much easier (and rewarding) task than you ever thought it could be!

Question: Do you have any other favorite tips for investing your money wisely? Leave a comment and tell me your favorite.

The investment tips above should not be construed as professional investment advice.

The Structure of the Investment Process

The Importance of Current Stock Price Information

Return on Invested Capital (ROIC) – 4 Reasons to Use ROIC to Pick Profitable Stocks

What Are the Advantages and Disadvantages of Online Trading?

Pros and Cons of Call Options