You should not put all your nest eggs in one basket. That’s why I recommend people invest outside of their 401k plan. (Here’s an article that explains why.) A good start is picking individual stocks. It doesn’t have to be mysterious or hard. Picking good stocks to invest in are within the realm of possibility of even the most average of Joes. Don’t believe me? Researchers have simulated monkeys throwing darts at stocks in the newspaper that end up outperforming both experts and the market as a whole. So just know that you have a great chance at picking profitable stocks on your own.
This video will break down some tips:
1) Individual Stocks Should Not Make up a Large Portion of Your Portfolio
Depending on your needs, goals and risk tolerance, you will want to limit the amount of individual securities in your portfolio. Having too much in individual stocks could be risky. If you don’t have a financial advisor, a good rule of thumb is to start with an amount of money that, should the value of the account decline, would not leave your savings wiped out. Also, this is money you should not need in the next 3-5 years. The key is to start now because time is money!
2) Plan to Invest Long-Term
This is not risky day trading! Plan to put your money in, keep adding to it and watch it grow. Investing is not a sprint! It’s a marathon. Go long and go strong, riding the ups and downs of the market pressing through to long-term portfolio appreciation. If you want broad exposure to the financial industry, you can invest in financial ETF’s to diversify.
3) Start with Companies You are Familiar with and Have Longevity
Think about brands that have household names that have been around a long time and will likely be around in the years to come. (For example, can you see a need for cleaning products in the year 2070?) These to qualities alone won’t lead you down the road to picking good stocks, but again, it’s a good place to start. (Don’t put all your eggs in one basket [company], start off with investing in 5 or 10 companies. Remember, all you need is one winner to make the difference!)
4) Consider Companies that Pay Dividends
Dividend payments are not always an indicator of company health, but it’s a good start. Remember these are companies that will periodically or regularly distribute dividend payments to it’s investors, a bonus on top of stock appreciation!
5) Keep Learning about Stock Analysis
No matter what, the direction of stock prices are hard to predict (unless you are a monkey with a dart.) But, you do want to learn more about how to analyze financial statements to give you a clue about what you are getting yourself into. It’s a not a requirement to get started, but it’s a “nice-to-have” to keep going. Take a class, read a book or join an investment club to find out more about how to analyze the companies you will invest in.
More importantly, just get started!
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