Investing is a lifelong path. The first step toward a successful investment strategy is disciplined savings habits. Regardless of whether you are saving for retirement, a new house, or just an extravagant dining room set, you need to develop regular savings habits. Regular contributions to savings or investment accounts are often the most productive; and if you can automate them, they are even easier.
While regular saving starts the process, investing some of your money can lead to more earnings growth. You’ll need to balance your goals and risk tolerance to find the most beneficial strategy.
What do you need the money for? The answer determines whether you want to put your savings into income-producing or growth-focused investments. For example, a retirement fund generally does not need to produce income until you retire, so you can emphasize a growth strategy until retirement nears then switch to an income-focused strategy.
All investing involves a certain amount of risk. You’ll need to balance your toleration of price fluctuations against the required rate of return to determine your appetite for investment risk. Time offsets risk. If you plan to hold an investment for a long time, you may tolerate more risk because you have the time to make up any early losses. For a shorter-term investment, such as saving to buy a house, you may want to take on less risk and have more liquidity in your investments.
Everyone’s life is different and with unique emotions about money, so investment decisions are highly personal. Following are a few basic rules that apply to most investors.
A money market fund, traditional savings account or certificate of deposit (CD) provide liquidity for emergencies.
This can protect your savings from being devalued due to inflation.
This habit will keep you up to date on your investments and spot potential problems in your strategy.
Take that into account when setting up and reviewing an investment strategy.
Article is adapted from content provided by DTS.
