However, most financial planners recommend these eight basic principles for investing wisely:
- Have a plan—Even a simple plan can help you take control of your financial future. Review it yearly or if circumstances change.
- Start investing as soon as possible—Make time your ally. Let it put the power of compounding to work for you while helping to reduce your potential investment risk.
- Diversify your portfolio—By investing in different asset classes—stocks, bonds and cash—you help protect against poor performance in one investment type while including investments most likely to help you achieve your important goals.
- Invest regularly—Investing is a process, not a one-time event. By investing regularly over the long term, you reduce the impact of short-term market gyrations. You also attend to your long-term plan before you are tempted to spend those assets on short-term needs.
- Maintain a long-term perspective—For most people, the best discipline is staying invested as market conditions change. Reactive, emotional investment decisions all too often bring regret and principal loss.
- Consider stocks to help achieve major long-term goals—Over time, stocks have provided the more powerful returns needed to help your investments' value stay well ahead of inflation.
- Keep a comfortable amount of cash in your portfolio—To meet current needs, including emergencies, use a money market fund or a bank account, not your long-term investment assets.
- Know what you are buying—Make sure you understand the potential risks and rewards associated with each of your investments. Ask questions, request information, and make up your own mind.
Excerpt permission granted by Harrison House Publishers
John Avanzini was born in Surinam, South America in 1936. He preaches the message of financial prosperity and teaches that God wants believers to be wealthy. He speaks in conferences and seminars worldwide about biblical economics.
