Cheat Sheet

Investing All-in-One For Dummies Cheat Sheet

From Investing All-in-One For Dummies

By Eric Tyson

Money is the biggest component of the investing world, but time comes in a close second. When you combine the two, you have the potential to grow your money into a healthy nest egg. The following articles point you to websites that can help you save money; show you why the sooner you start investing, the better; and offer some basic investing advice that will pay off with every dollar you invest.

Websites That Can Help You Boost Your Savings

Before you can invest, you have to have a few extra dollars. But how do you save money with so many unavoidable basic expenses? Investors find ways to be smart about their money, even paying for routine costs. These sites can help you boost your savings:

  • Feed The Pig urges you to stop wasting money and offers tips to help you get out of debt by cutting excess spending. The site can calculate how to get out of debt and even how much you can save by packing a lunch instead of buying one.
  • Get Rich Slowly provides tips, calculators, and online tools to help you save more so you can invest more. The site’s front page has daily entries of note to savers and investors. The site is a blog, which features posts offering suggestions on how to better manage your money.
  • The Consumerist offers tips to educate consumers. It explains how to play hardball with service providers, like cellphone companies, that sock you with monthly fees. This site is also a blog, providing a daily stream of posts with tips and suggestions for consumers.

Start Now to Become a Successful Investor

The greatest force all investors have is time. Don’t waste it. The sooner you start to save and invest, the more likely you’ll be successful.

Take the example of five people, each of whom wants to have $1 million in the bank by the time he or she retires at age 65. The first investor starts when she is 20, followed by a 30-year-old, 40-year-old, 50-year-old, and 60-year-old. Assuming that each investor starts with nothing and averages 10 percent returns each year, the following table shows how much each must save per month to reach his or her goals.

An Investor Who Is Must Invest This Much Each Month to Have $1 Million at Age 65
20 years old $95.40
30 years old $263.40
40 years old $753.67
50 years old $2,412.72
60 years old $12,913.71

Note: Assumed 10% annual rate of return

See, youth has its advantages. A 20-year-old who saves less than $100 a month will end up with the same amount of money as a 60-year-old who squirrels away $12,914 a month or $154,968 a year! That’s largely due to the fact that money that’s invested early has more time to brew. And over time, the money snowballs and compounds.

10 Tips for Investing Success

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 can pay you big dividends (and capital gains) for many years to come.

  • Regularly save and invest 5 percent to 10 percent of your income: Do 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.
  • Understand and use your employee benefits: Often, the most valuable benefit you have through your employer is a retirement savings plan, such as a 401(k) plan that enables you to make contributions and save on your current income taxation.
  • Thoroughly research before you invest: Be sure you understand what you’re investing in. Don’t purchase any financial product that you don’t understand. Ask questions until you understand the risks and returns of the product.

 

  • Shun investments with high commissions and expenses: The cost of the investments that 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.
  • Invest the majority of your long-term money in ownership investments: 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 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.

    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.
  • 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.
  • Trust yourself first: Look in the mirror. You’ll see the best financial person that you can hire and trust. What may be missing is enough education and confidence to make more decisions.

    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 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.