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As
a small business owner, you may need to know where to get
personal investment advice to protect your earnings. Good
free investment advice consists of reminding you of
certain basic principles that you should adhere to in
order to maximize your financial performance in the
marketplace. For more specific advice, get your financial
planning advice directly from a qualified financial
planning advisor.
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The
most common mistake that small investors make is to become
emotionally involved in their investments. Sound, general
advice about investments consists of reminding one of the basic
principles of investing.
Good
investment practice begins with understanding and setting your
goals for investment. This does not refer to how much money you
want to make, but to how much risk you can assume with your
funds, and how long you expect to be able to invest before you
begin withdrawing from your portfolio.
Once
you have determined those goals, you must follow the "three
D's" of investment.
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Diversify: Don't put all your eggs in one basket or your money in one sector. As the economy expands and slows money has a tendency to flow back and forth between equities and fixed instruments. But inside these two markets exists a selection of sectors that also expand and slow with differing rates. This makes the proposition of timing the market even more preposterous since you have to time the smaller sectors against the broader sectors. The solution? Develop a portfolio that invests across a selection of sectors that match your overall accumulation goals with respect to your risk tolerance and time line.
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Dollar Cost Average: Dollar cost averaging is the systematic purchase of investment instruments over time. By buying an equal dollar amount each period, you should end up with a cost basis that is close to the average over that period. This is especially valuable in volatile markets where dramatic swings are experienced and diving in on the wrong day could be a significantly sobering event. However, with any investment program, there are no assurances of success. No investment program can guarantee a profit or protect against a loss in a declining market. And since dollar cost averaging involves continuous investment in securities, you should consider your ability to continue purchases through periods of low prices.
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Discipline:
This is the single most important factor in avoiding the before-mentioned traps. Although the market moves on the economy, it can also swing wildly based on psychological reasons such as political turmoil, rumors on interest rate changes, or other world events. If the fundamentals of the economy still match your overall portfolio objective then you stay the course. This is where the financial professional often becomes the deciding factor between the investor's success or failure to reach his or her goals.
Following
these principles rigorously can help you to avoid the common
experience of "buying high and selling low", exactly
the opposite of what you need to do to make money in the market.
When you are feeling nervous about your investments and your
position in the market, step back and review your principles and
make sure that you are adhering to them. This is your best
approach to long term value and satisfaction.
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