Top tips for how to multiply your money. Where you should invest depends on why you are investing, over how long and the amount of risk you are willing to take. When investing on a monthly basis, it is best to have a clear understanding of what you are actually saving the money for. If your aim is to build up emergency funds or you’re saving for something specific and expect to spend the money within the next three to five years, savings accounts and cash individual savings accounts (Isas) are probably the best way to go. You should aim to make regular deposits into a cash Isa, where all interest will be paid tax-free. Justin Modray, director of Candid Financial Advice, says the golden rule is the same however much you invest: make sure you don’t bite off more risk than you can chew.
Peter Lynch famously spoke about “tenbaggers”-investments that increased tenfold in value. He attributed his success to a small number of these stocks in his portfolio. But this required the discipline of hanging onto stocks even after they’ve increased by many multiples, if he thought there was still significant upside potential. The takeaway: avoid clinging to arbitrary rules, and consider a stock on its own merits. There is no guarantee that a stock will rebound after a protracted decline, and it’s important to be realistic about the prospect of poorly-performing investments. And even though acknowledging losing stocks can psychologically signal failure, there is no shame recognizing mistakes and selling off investments to stem further loss.
The answer is by buying an index fund. Index funds are the best friend of the passive investor who want an easy way to invest in the market. An index fund is a type of fund with a portfolio constructed to track a certain index. Index funds can track the return of the S&P 500, Dow Jones, or NASDAQ. Index funds can either be exchange traded funds or mutual funds that hold securities in a given market. A S&P 500 index fund will buy shares of the 500 largest companies in the United States and will track the movements of the Standard and Poor’s 500 index. This fund will replicate the performance of the S&P 500 index. If the S&P 500 index is up 10 percent for the year then a fund like the Vanguard S&P 500 index or the iShares S&P 500 index should be up approximately 10 percent as well. Read more on Easiest Way to Invest Money.
Not many small investors begin their investment journey with US Treasury securities, but you can. You’ll never get rich with these securities, but it is an excellent place to park your money—and earn some interest—until you are ready to go into higher risk/higher return investments. Treasury securities, also known as savings bonds, are easy to buy through the US Treasury’s bond portal Treasury Direct. There you can buy fixed-income US government securities with maturities of anywhere from 30 days to 30 years in denominations as low as $100. You can also use Treasury Direct to buy Treasury Inflation Protected Securities, or TIPS. These not only pay interest, but they also make periodic principal adjustments to account for inflation based on changes in the consumer price index.
Many good investors stress the importance of diversification. But Warren Buffett tends to disagree with the idea. Buffett says that diversification is for people who don’t know much about investing. An experienced investor should choose stocks on a long-term basis and should have faith on his/her investments. Some investors diversify their portfolios because they are afraid that any one stock might sink their entire portfolio; but, while doing so, it becomes much harder to keep track of the current events impacting each company. So, by diversifying, they might reduce the volatility of their portfolio, but at the same time they reduce their focus on individual investments. Buffett waits for opportunities to buy good stocks, and when those opportunities come his way, he takes full advantage. According to Buffett, “When it’s raining gold, put out the bucket not the thimble.”
About MultiplyMyMoney : I have more than 12 years of experience as an independent and personal financial and investment consultant. I used to run a financial blog called BuylikeBuffett which provided insight on investing, saving, money management, and all things finance. I am also the author of Your Financial Playbook: A Guide To Navigating The World Of Personal Finance a financial guide written to inform the beginning investor about the basics of the market. I decided to start a new site because I receive a great number of questions about financial topics on a daily basis. I figure that this would be a great way to answer those questions and increase financial literacy. I also figured it would be a good platform to write articles on everything from teaching how to get rich, explaining the basics of cryptocurrency, to detailing ways of rebuilding your credit score. I was the founder and president of New Horizons Financial Management, LLC, and was a registered investment advisor. New Horizons was an independent investment advisory asset management and personal financial consulting firm offering investment advisory services to high net worth individuals. Read more info on Learn how to multiply my money.