Five Tips for Successful Investing
By Charlestien Harris, Retired Financial Coach at Southern Bancorp
April is recognized as National Financial Literacy Month. One of the most important lessons I learned as an experienced financial counselor is knowing when to take on a client and when to provide a warm introduction to connect them with the right professional to help achieve their personal financial goals. Early in my career, I realized that investing is a personal finance topic best handled by an investment professional, and that is perfectly okay.
Successful investing is defined as the disciplined, long-term process of growing wealth to meet personal financial goals. It is all about making informed choices – whether you want to grow your money or preserve your assets. One thing I am very confident about is that sound investing requires setting clear goals, taking informed action, and balancing your risk tolerance.
Below are several tips I found through research that can help you navigate the world of investing more successfully.
1. Set investment goals.
One of the first and most important steps is identifying your short, medium, and long-term financial goals. You should also estimate how much each goal is likely to cost. It is helpful to clearly define what you want to accomplish financially, how much it will cost, and what resources you will need to be successful.
Make a list of the assets you already have and the additional resources you may need to reach your investment goals. Setting up separate savings or investment accounts for major goals can help you stay organized, remain on track, and clearly see your progress over time.
2. Timing matters.
Timing is one of the most important factors in successful investing. It includes not only when you will need your money, but also how your funds may be invested. Consistency plays a critical role in timing. Investing regularly, regardless of market conditions, can help reduce stress and lower the risk associated with trying to choose the perfect moment to invest.
Too often, investors realize they need money sooner than expected and are forced to sell when the market is unfavorable. Another essential element of investing is compounding, which is the process of earning returns on both your initial investment and the accumulated earnings over time. The longer money remains invested, the more powerful compounding becomes. A commonly used tool, the Rule of 72, estimates how long it will take an investment to double by dividing 72 by the annual rate of return.
3. Be patient.
We have all heard that patience is a virtue, and that certainly applies to investing. Long-term strategies, such as buying and holding, tend to perform better over time unless you need immediate access to your money. Entering the stock market can feel risky for new investors, but learning how investing works takes time.
Taking the time to educate yourself can help you avoid common mistakes and make more informed decisions. Patience is a critical strategy for building long-term wealth, and it can pay off significantly over time.
4. Test the waters.
“Testing the waters” is a smart way to reduce risk when you are new to investing. Consider starting small, both in the amount of money you invest and the number of investments you choose. If you work with an investment professional, allow time to build trust and understanding.
Testing the waters also allows you to determine whether investing is right for you or if another method of growing your money is a better fit. For those who are tech-savvy, investment apps can provide an easy entry point into the stock market. There are many apps available to suit different goals and budgets, so take time to research and select one that meets your needs.
5. Educate yourself.
Educating yourself is one of the most important advantages you can give yourself as an investor. Understanding what you are investing in – especially unfamiliar investments – can help you make confident decisions and stay focused on your goals.
Ask questions such as: How does the investment work? What fees are involved? Learn how to track and understand the investments you own so you can ask informed questions when something is unclear. Avoid relying on hunches or “hot tips,” and never stop learning about investing.
Saving money is often the first step toward investing. While saving and investing are different, regularly setting aside money helps you adjust your budget and build discipline. Savings also provide a cushion for emergencies and create opportunities to invest money you do not need immediately.
You do not need a large amount of money to get started, and investing is often easier than it seems when you follow these steps. Some helpful educational resources include the U.S. Treasury, the Federal Trade Commission, the Jump$tart Coalition, Investopedia, and Finsheet. These sites are provided for educational purposes only.
For more information on this or other financial topics, you may email me at [email protected] or write to P.O. Box 1825, Clarksdale, MS 38614.
Until next week – stay financially fit!
