Investing in Your 20s & 30s For Dummies
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Investing appears to be complicated and complex. But if you can take some relatively simple concepts to heart and adhere to them, you can greatly increase your success. Here are ten time-tested principles of investing success. Following these principles will pay you big dividends (and capital gains) for many years to come.

Regularly save and invest 5 percent to 10 percent of your income

Unless you enjoy a large inheritance, you should consistently save 5 percent to 10 percent of the money you’re earning. When should you start doing this? As soon as you begin earning money on a regular basis.

Preferably, invest through a retirement savings account to reduce your taxes and ensure your future financial independence. You can reduce both your current federal and state income tax bills (on the contributions) as well as these ongoing bills (on the investment earnings).

The exact portion of your income you should be saving is driven by your goals and by your current financial assets and liabilities. Take the time to crunch some numbers to determine how much you should be saving monthly.

Understand and use your employee benefits

The larger the employer, the more likely it is to offer avenues for you to invest conveniently through payroll deduction, and with possible tax benefits and discounts. Some companies enable you to buy company stock at a reduced price.

Often, the most valuable benefit you have is a retirement savings plan, such as a 401(k) plan that enables you to make contributions and save on your current income taxation. Also, after the money is in the account, it can compound and grow over the years and decades without taxation.

If you’re self-employed, be sure to establish and use a retirement plan. Also take time to learn about the best investment options available to you — and use them.

Thoroughly research before you invest

The allure of large expected returns too often is the enticement that gets novices hooked on a particular investment. That’s a whole lot more appealing than researching an investment. But research you must if you want to make an informed decision.

Be sure you understand what you’re investing in. Don’t purchase any financial product that you don’t understand. Ask questions and compare what you’re being offered with the best sources I recommend. Beware of purchasing an investment on the basis of an advertisement or a salesperson’s solicitation.

Shun investments with high commissions and expenses

The cost of the investments you buy is an important variable you can control. All fees must be disclosed in a prospectus, which you should always review before making any investment.

Companies that sell their investment products through aggressive sales techniques generally have the worst financial products and the highest fees and commissions.

Invest the majority of your long-term money in ownership investments

When you’re young, you have plenty of time to let your investments compound and grow. Likewise, you have time to recover from setbacks.

So with your long-term money, focus on investments that have appreciation potential, such as stocks, real estate, and your own business. When you invest in bonds or bank accounts, you’re simply lending your money to others and will earn a return that probably won’t keep you ahead of inflation and taxes.

Avoid making emotionally based financial decisions

Successful investors keep their composure when the going gets tough. You need the ability and wisdom to look beyond the current environment, understanding that it will change in the months and years ahead.

You don’t want to panic and sell your stock holdings after a major market correction, for example. In fact, you should consider such an event to be a buying opportunity for stocks. Be especially careful about making important financial decisions after a major life change, such as marriage, the birth of a child, a divorce, job loss, or a death in your family.

Make investing decisions based on your plans and needs

Your investment decisions should come out of your planning and your overall needs, goals, and desires. This requires looking at your overall financial situation first and then coming up with a comprehensive plan.

Don’t be swayed and influenced by the predictive advice offered by various investment pundits or the latest news headlines and concerns. Trust that you know yourself and your financial situation better than anyone else does.

Tap information sources with high-quality standards

You need to pare down the sources you use to keep up with investing news and the financial markets. Give priority to those that aren’t afraid to take a stand and recommend what’s in your best interests.

The public clearly has an appetite for opinion shows; on the political left, you have programs on CNN and MSNBC. On the political right, FOX has some popular conservative opinion shows.

Political partisans distort the news rather than report the news, and they prevent you from better understanding what’s really going on so you can make informed decisions. Political partisans overstate the impact that the president and others can have over our economy and financial markets.

Stay away from outlets that cater to advertisers or are driven by an ideological agenda.

Trust yourself first

Look in the mirror. You’ll see the best financial person you can hire and trust. What may be missing is enough education and confidence to make more and better decisions on your own, which this book can assist you with doing.

If you need help making a major decision, hire conflict-free advisors who charge a fee for their time. Work in partnership with advisors. Never turn over or abdicate control.

Invest in yourself and others

Don’t get so wrapped up in making, saving, and investing money that you lose sight of what matters most to you. Invest in your education, your health, and your relationships with family members and friends.

Having a lot of money isn’t worth much if you don’t have your health and people with whom to share your life. Give your time and money to causes that better our society and our world.

About This Article

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About the book author:

Eric Tyson, MBA, is a bestselling personal finance author, counselor, and writer. He is the author of the national bestselling financial books Investing For Dummies, Personal Finance For Dummies, and Home Buying Kit For Dummies.

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