Before you start to invest your overtime money, there are some points I want you to look at before you invest. These are common mistakes that many people make when they first start to invest. Don't let this be you. Read on and educate yourself.
1. Not Taking Action. You're not gonna earn money by being a bum. If you're looking for a nice chunk of money when you retire, you better act fast. Although there is no guarantee that the market will go up when you first invest, I can guarantee you one thing: Doing nothing at all will not provide for a comfortable retirement.
2. Starting Late. The earlier you start the better off you are. Enough said!
3. Get Rid of Your Credit Card Debt First. If you have money in your savings account and you have revolving debt on your credit card, pay it off. You need to pay off your debt first before you even think about investing. What's the use of investing your money if you need it to pay for your credit card bills? You won't save money that way. It just means that you'll be paying down your credit card forever. Do you really want that?
4. Short Term Investing. Only invest money for the short term if you're really going to need that money fast. That means if you plan on taking a vacation or thinking of buying a new car, you invest in short term. This can usually be accomplished by putting your money in a money market fund or CDs (Certificate of Deposit). Invest money in the stock market that you won't need for at least three years, maybe even five years or longer.
5. Turning Down Free Money. If I gave you $100 for no reason at all with no strings attached, would you take it? Of course! No one likes to turn down free money, but that's exactly what you are doing if you're not participating in your companys 401(k) or similar retirement savings plan. Take advantage of all tax-advantaged, employer-matched savings programs.
6. Investing Safe. If you're young, most of your investing dollars should be in the stock market because you have enough time to weather the storm in case the market goes down. You'll be able to recover and reap the rewards of long-term gains. As you get older, you don't want to risk as much so you may want to transition into bonds since your source of income will come from these investments as well, but overall, stocks should make up a large portion of the portfolio of every investor.
7. Playing Scared. Not every investment is for everyone. Even if you're a daredevil, you shouldn't pour all of your money into something that could end up going down the drain. This is where researching your investments really count. Research everything before you invest in anything, whether it be stocks, bonds or mutual funds.
8. Collectibles or Lottery Tickets are not Investments. If your Superman or Spiderman mint collection of comic books, Baseball cards or your grandpa's vintage WW2 watch could be used to fund retirements, do you think the stock market would exist? Heck no! Don't make the mistake of thinking your jewelry, those Beanie Babies, or the lottery will provide for you in your later years because they won't. You're just wasting your money.
9. Trading In and Out of the Market. I believe that the best approach to investing is to invest for the long run. Pick your investments wisely and you'll reap the rewards over the long term that you had ever dreamed possible. Trading in and out of the market will only hurt you and you'll be bombarded with fees that will slowly eat away at your returns. Eventually, you'll miss out on gains that long-term investors enjoy with much less effort.
Keep this in mind before investing and you will have no problems once you start. I'll be covering more later on, but that's all I have for now. Invest wisely people. Till then, peace out!
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