Investing in Your 20s & 30s For Dummies
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Anybody, no matter what his or her educational background, IQ, occupation, income, or assets, can make solid returns investing in stocks. To maximize your chances of stock market investment success, remember the following:
  • Don’t try to time the markets. Anticipating where the stock market and specific stocks are heading is next to impossible, especially over the short term. Economic factors, which are influenced by thousands of elements as well as human emotions, determine stock market prices. Be a regular buyer of stocks with new savings. As I discuss earlier in this chapter, buy more stocks when prices are down and market pessimism is high.
  • Diversify your investments. Invest in the stocks of different-size companies in varying industries around the world. When assessing your investments’ performance, examine your whole portfolio at least once a year, and calculate your total return after expenses and trading fees.
  • Keep trading costs, management fees, and commissions to a minimum. These costs represent a big drain on your returns. If you invest through an individual broker or a financial advisor who earns a living on commissions, odds are that you’re paying more than you need to be, and you’re likely receiving biased advice, too.
  • Pay attention to taxes. Like commissions and fees, federal and state taxes are major investment expenses that you can minimize. Contribute most of your money to your tax-advantaged retirement accounts. You can invest your money outside retirement accounts, but keep an eye on taxes. Calculate your annual returns on an after-tax basis.
  • Don’t overestimate your ability to pick the big-winning stocks. One of the best ways to invest in stocks is through mutual funds and ETFs, which allow you to use an experienced, full-time money manager at a low cost to perform all the investing grunt work for you.

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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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