How to Become a Wise Investor
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How to Become a Wise Investor

You should learn how to prepare for your retirement.

In the past 20 years, employees have learned how to become wise investors by taking advantage of 401(K) plans. Many individuals have become millionaires in the process. The 401(K) is a subsection of the United States Internal Revenue Code. Today, almost 60% of all American households have 401(K) accounts. This plan allows the worker to set aside funds for retirement and the funds can be withdrawn at age 59 1/2. Learning how to invest your money is a big responsibility. Investors must manage a portfolio that will allow them to meet their retirement goals. To become a wise investor, you must learn as much as you can about how to invest your money.

Things You'll Need

A Retirement Goal

A Steady Income

An Investment Strategy

Step 1 Start Saving for Retirement Now

Learn how to become a wise investor by starting a savings plan for retirement today. Keep in mind that one of the best strategies is to start saving for retirement as soon as possible. Visit a bank and open a basic savings account if you do not have a savings account. Deposit money into this account until you get up to $1,000 and use the funds only for unexpected emergencies. Do not forget that you can also deposit additional funds into the account to help you build wealth. Read and review the information at Fidelity.com about preparing and planning for early retirement.

Step 2 Learn the Basics of Investing

Learn the basics of investing to help you become a wise investor. Study some of the basic concepts of investing so that you will make wise investment decisions. Make sure you understand cash, bonds, and stock investment options. Keep in mind that as you get older you will need more cash to retire successfully. At a younger age, it is wise to invest mostly in stocks and bonds. The most common types of stocks are large caps, mid-caps, small caps, and international stocks. Get help or assistance from a financial planner if you have trouble understanding investment terms and concepts.You can also invest in mutual funds to help you reach your retirement goals.

Step 3 Make Smart Investment Decisions

Make smart investment decisions to help you learn how to become a wise investor. Do not invest you money into something that you do not understand. To become a wise investor, you must also know the risks of all investment classes. Stocks have a high risk, bonds have a low risk, and cash is the safest investment in any portfolio. Stocks provide higher returns in the long run and you own part of the company. Bonds grow slower and some bonds are tax-free. When investing your dollars, try to diversify your portfolio by obtaining a combination of stocks, bonds, cash, real estate, and mutual funds.

Step 4 Invest for Your Future

Invest regularly to help you learn how to become a wise investor. You are responsible for making sure you invest for your future. Try to contribute the maximum amount into your employer's 401(K) plan or a similar plan. Save at least 10% of your income if you can. Pay-off outstanding debts so that you will be able to invest more money in the future. Avoid spending your hard earned cash on things that you do not need. Do not use credit cards. You goal is to pile up cash so that you can live debt-free in your retirement years. Develop a budget for each pay check you receive and spend every dollar wisely. Get a part-time job if it is necessary to bring in additional income and make sure you spend quality time with your spouse and kids. Teach your kids how to prepare meals at home.

Tips:

  • Join an investment club and subscribe to investor newsletters.
  • Read books that tell you how to invest your money wisely.
  • Use the Internet as a tool to help you make wise investment decisions.
  • Contact stock brokers that have a proven record for picking the best stocks.

Warnings:

  • Avoid the investments that sound too good.
  • Do research on companies before you make the investment decision.
  • Make sure you understand the business and learn how to read financial statements.
  • All investments have a risk and they are not insured by the FDIC.

Reference:

Fidelity - Invest Early and Prioritize

Brigham Young University Marriott School - Tax-Efficient Wise Investments

North Dakota State University- Saving and Investing Today... For Tomorrow

Resource:

Boston College - Wise Women Investors Make 43% Returns

Employee Benefit Research Institute- Retirement Personality Profiler

The Simple Dollar- Little Steps: 100 Great Tips For Saving Money For Those Just Getting Started

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Comments (1)

Valuable and informative share...and nicely written, too. Thanks for posting useful information. Voted!

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