To avoid both of these extremes, investors have to understand the typical lies they tell themselves. Here are three of the biggest:. So waiting for the perception of safety is just a way to end up paying higher prices, and indeed it is often merely a perception of safety that investors are paying for.
What drives this behavior: Fear is the guiding emotion, but psychologists call this more specific behavior "myopic loss aversion. This excuse is used by would-be buyers as they wait for the stock to drop. But as the data from Putnam Investments show, investors never know which way stocks will move on any given day, especially in the short term. A stock or market could just as easily rise as fall next week. What drives this behavior: It could be fear or greed.
This excuse is used by investors who need excitement from their investments, like action in a casino. But smart investing is actually boring. The best investors sit on their stocks for years and years, letting them compound gains. You should also evaluate your income situation periodically, but at least once a year. You make enough money, you live pretty well, but you're not saving enough. What's wrong? The main reason this occurs is that your wants exceed your budget.
To develop a budget or to get your existing budget on track, try these steps:. The most important step is to distinguish between what you really need and what you merely want. Finding simple ways to save a few extra bucks here and there could include programming your thermostat to turn itself down when you're not home, using regular gasoline instead of premium, keeping your tires fully inflated, buying furniture from a quality thrift shop, and learning how to cook.
This doesn't mean you have to be thrifty all the time. If you're meeting savings goals, you should be willing to reward yourself and splurge an appropriate amount once in a while.
You'll feel better and be motivated to make more money. You're making enough money and saving enough, but you're putting it all in conservative investments like the regular savings account at your bank. That's fine, right? If you want to build a sizable portfolio, you have to take on some risk , which means you'll have to invest in securities. So how do you determine what's the right level of exposure for you?
Begin with an assessment of your situation. The CFA Institute advises investors to build an investment policy statement. To begin, determine your return and risk objectives. Quantify all of the elements affecting your financial life, including household income, your time horizon, tax considerations, cash flow or liquidity needs, and any other factors unique to you. Next, determine the appropriate asset allocation for you. Most likely you will need to meet with a financial advisor unless you know enough to do this on your own.
This allocation should be based on your investment policy statement. Your allocation will most likely include a mixture of cash, fixed income, equities, and alternative investments. Risk-averse investors should keep in mind that portfolios need at least some equity exposure to protect against inflation.
Personal Finance. Credit Cards. About Us. Who Is the Motley Fool? Fool Podcasts. New Ventures. Search Search:. Jul 17, at AM. Author Bio Katie Brockman is a personal finance and retirement writer who enjoys geeking out about k s, budgeting, and Social Security.
When she's not providing unsolicited financial and retirement advice to anyone who will listen, she enjoys reading, drawing and painting, and walking dogs at her local animal shelter.
Key Points Time is your most valuable asset, and it can have a bigger effect on your money than you may think.
Sometimes playing it too safe with your investments could hurt your earning potential. The number of stocks you buy could make or break your strategy. Investing in yourself is one of the best possible investments you can make.
While you might not be able to pinpoint an actualized return on investment, there's no money that's better spent. Invest in yourself. Invest in your education. Discover what you're passionate about.
There are loads of money-making courses on the internet. The hard part is choosing the right one. From ebooks to social media marketing, search engine optimization and beyond, the possibilities are endless. While many money-making gurus might pop up on social media, not all courses are created alike. Spend time doing your due diligence and research to choose the one that's right for you.
Trading commodities like gold and silver present a rare opportunity, especially when they're trading at the lower end of their five-year range.
Metrics like that give a strong indication on where commodities might be heading. Carolyn Boroden of Fibonacci Queen says, "I have long-term support and timing in the silver markets because silver is a solid hedge on inflation. Plus, commodities like silver are tangible assets that people can hold onto.
The fundamentals of economics drives the price of commodities. As supply dips, demand increases and prices rise. Any disruption to a supply chain has a severe impact on prices.
For example, a health scare to livestock can significantly alter prices as scarcity reins free. However, livestock and meat are just one form of commodities.
Metals, energy and agriculture are other types of commodities. To invest, you can use an exchange like the London Metal Exchange or the Chicago Mercantile Exchange , as well as many others.
Often, investing in commodities means investing in futures contracts. Effectively, that's a pre-arranged agreement to buy a specific quantity at a specific price in the future. These are leveraged contracts, providing both big upside and a potential for large downside, so exercise caution. Cryptocurrencies are on the rise. While trading them might seem risky, if you hedge your bets here as well, you could limit some fallout from a poorly-timed trade.
There are plenty of platforms for trading cryptocurrencies as well. But before you dive in, educate yourself. Find courses on platforms like Udemy, Kajabi or Teachable. And learn the intricacies of trading things like Bitcoin , Ether , Litecoin and others. While there are over 3, cryptocurrencies in existence, only a handful really matter today. Find an exchange, research the trading patterns, look for breakouts of long-term moving averages and get busy trading.
You can use exchanges like Coinbase , Kraken or Cex. Peer-to-peer lending is a hot investment vehicle these days.
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