6 Basic Principles of Smart Investing

Whether you are saving for a home, retirement, or your child’s education, you want a plan that will help your money grow. Here are five basic investing principles that are key to becoming a successful investor:

Know Yourself
It is important to understand why you are investing, what your time horizon is, and how comfortable you are with taking risks. This is known as your investor profile; it will help you determine the right mix of investments to meet your goals.

Diversify, Diversify, Diversify
Spreading your assets across a wide range of different investments is one of the best ways to reduce risk and increase potential returns over the long term. Holding a mix of cash, fixed income and equity investments while still taking advantage of regional and industry specific funds will help protect your portfolio through both the ups and downs.

Automatic “Millionaire
It’s generally much easier to come up with a smaller amount to invest on a monthly or weekly basis than to make a large, lump-sum contribution. A regular investment plan takes advantage of this, and also helps you to be disciplined, making savings a priority.

Dollar Cost Averaging
By investing small amounts on a regular basis, your overall purchase price will be averaged out as opposed to ending up buying in when the markets are high. After all, it’s not about “timing the market” but rather “time IN the market”.

Monitor Your Assets
It’s a good idea to examine your investment portfolio at least once a year-to ensure that it continues to meet your needs. Life events (marriage, children, retirement) should also be a cue that it’s time to review your portfolio.

Thing Long Term
Market fluctuations are a reality. No one can predict exactly that the market will do, or when fluctuations will occur. One of the keys to success is having a long-term plan, and sticking with it.