5 Secrets To Successful Investing

Becoming a successful investor takes time, patience, and trial and error. The end goal of most investors is to make money and lots of it. However, the question that remains is how to do it?

If you are trying to learn the basics of how to invest money, then here are five secrets to successful investing.

1. Choose A Goal For Your Investment Portfolio

Before you start investing, you need to understand what to expect from your money. Understand what you want to use as a safety net or for retirement. Regardless of the reason why you want to start investing, make sure you have a clear objective for your portfolio.

2. Reduce Fees

When you start investing, you might quickly realize that you have to give up some money in fees, brokerage commissions, and mutual fund expense ratios. However, each dollar that goes to these charges is a dollar that you aren’t investing and compounding. Even though it might be just a small amount each year, it adds up quickly. It can end up being the loss of thousands or even millions of dollars over the years.

3. Hold Onto The Investments

Watching Hollywood films about stockbrokers who excel at day trading might make you think you can get a fat paycheck doing this too. However, timing the market, even in a strong market, is nearly impossible.

A few successful trades and the earnings you’ve made might be wiped out by a single mistake. With the fees, commissions, and any taxes you’ve made on your trades, you might not even make all that much money. Instead, it is smarter to choose your investments and hold onto them for at least a year before selling to help increase your good returns.

4. Be Tax-Efficient

Any of the money you make on an investment, including dividends and interest, you have to pay taxes on it. However, a way to legally protect yourself is by using tax shelters like the Roth IRA and the 401(k).

Investing in a 401(k) means you can invest in a variety of mutual funds. It's important to know that however much you contribute will be deducted from your taxable income. Others might find that a Roth IRA works better for them. Instead, the money is taxed upfront, with no taxes taken out on capital gains, interest, or dividends when you retire.

5. Diversify

Investing can be a volatile industry, so you should never have all your money in a single stock. Even if you find the next Apple Inc. AAPL stock that gives you good dividend yields, there are other companies out there that offer similar benefits. You should diversify so if something does go wrong at one of the companies, it won’t completely destroy your portfolio.

You don’t have to have insider knowledge to begin investing. The best time to start is now, and the sooner you begin, the sooner you can start making money.

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