Worried about the wild swings in the stock market? Not sure what’s next for the economy?
You can successfully invest in these uncertain times—and you won’t have to chase the next new IPO or buy into the latest advice on CNBC.
Here are the top five things every investor should know.
1) Costs Matter.
Over a working career, an increase of 1% per year in expenses results in almost a 30% reduction in lifetime wealth accumulation.
2) Inflation Counts.
The average mutual fund investor has not even kept up with inflation over the past 20 years —even with the stock market and bond market generating solid returns.
If inflation is consistent with long-term averages, in ten years you will need $135 to purchase goods that cost $100 today.
3) Diversify Effectively.
Sure, diversification helps portfolios to weather big declines in any single asset class. However, effective diversification requires much more than just buying a few funds. Investments that sound “different” (like “international” vs.” domestic” stocks) may provide no diversification value when combined in a portfolio.
4) Market Timing Doesn’t Work.
The average mutual fund investor loses 2% per year due to chasing performance and related bad timing decisions.
In fact, most investors may be better off by simply buying index funds.
5) Don’t Believe the Hype.
Your odds of picking a fund manager who can consistently beat his benchmark are low and the advice can be expensive. The average actively managed mutual fund has an expense ratio of 1.4% while the average index fund has an expense ratio of 0.9%.
Related Links:
- Searching for the Best Internet Investing Sites
- What’s the Difference Between Passive Investing and Tactical Asset Allocation?
- What You Need to Know Before You Invest in IPOs
Understanding your investing profile to achieve your financial goals starts with a few simple questions. The Investor Questionnaire, by Folio Investing, will help you understand your investment time horizon, investor profile and level of risk.
you are right and inflation is growing especial in crisis like this global economic crisis
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