3 Investing Tips So Easy Like Magic
Investing can be difficult and bear no fruits if you’re not careful. The market is overflowed with players having their own unique goals. In a rush to hit the jackpot, things can get confusing if you don’t make a plan to stick to.
Sounds trite? It shouldn’t be a too complicated plan. The simpler, the better. It will not only be easier for you to stick to a simple plan. As a rule, more straightforward strategies are more effective than complex ones.
Given that, we want to share with you three simple tips. Newbies and seasoned investors alike should learn them to get the best bang from the market.
1. Automated investments
Focus on the process, not the result. Your efforts to achieve a particular outcome can disappoint if you don’t follow a tried and tested approach. You need to believe that this proven approach will ultimately lead to the desired result.
This approach is most often used in cases where you automatically invest a certain amount of money without any actions on your part. Most brokerage firms offer this option, including withdrawing a fixed sum from your bank account following the schedule you previously set, both for making trades and withdrawing the profit earned.
2. Dividend reinvestment plan
As we said above, you and your funds are safer when you make scheduled automatic deposits to your account. You can reinvest dividends earned from investing in stocks, for example, taking the same approach. Buy more shares of the same company.
Drip… drip… drip… so-called dividend reinvestment plan. Most publicly traded companies will help you open a position in their shares without a brokerage account. The dividends received during this time frame will help you invest in more shares. Many brokerage firms also offer to reinvest dividends when opening a new position.
If you are looking for a long-term investment strategy, DRIP will bring outstanding results. For example, let’s take a look at JPMorgan Chase (NYSE: JPM). $10,000 investment 20 years ago would bring in $35,380 today. That’s if you spend, not reinvest the dividends received during this period. If you reinvested the paid dividend in JPM stocks, your income would be $63,590 over the same period.
The main advantage of DRIP is that no effort is required from you. Most investors don’t even notice how much time they waste as investing happens in the background.
3. Simple and boring
Too many people view the stock market as a way to spend free time with pleasure rather than a way to accumulate capital. It doesn’t mean that investing is not fun. However, often the desire to enjoy the market leads to investing in hot stocks and, as a result, low-profit rates.
The following data will surprise you: according to Standard & Poor’s studies, in the last five years, only three-quarters of large-cap mutual funds outperformed the S&P 500. This percentage declines even more when the time range is extended to 10-15 years.
Before you get the idea that your fund is an exception, remember that it’s pretty rare for a fund to exceed benchmarks on an ongoing basis.
