Sensible Investing: Everything You Need To Know

The world of investing is a fast-paced, dynamic one. New products and services are being introduced all the time, while others are disappearing. It’s easy to get lost in the complexity of it all.

With so much information available, it can be hard to know which way to turn. But there’s no need to panic – sensible investing is all about passive and evidence-based investing, which seeks to capture the returns offered by the markets. This is achieved by a pre-determined strategy that focuses on:

• Keeping costs low by avoiding unnecessary trading;
• Diversifying across the whole market and a wide set of asset classes;
• Taking the long-term view – markets can do better in some years and worse in others, but passive investors understand that markets are efficient and operate based on all known information. Research shows that it is extremely difficult to beat the market consistently, year on year.

Here are some tips to help you easily transition into sensible investing.

Take your time, don’t rush into things.

We’re all human, and we all make mistakes. The key here is learning from those mistakes, so you can avoid making them again and again. Don’t let fear or greed drive your decisions about money; that’s how people get into trouble with their finances in the first place! And don’t start telling everyone you know about how much money you’ve made, just because someone else makes more doesn’t mean that their lifestyle is better than yours (or vice versa).

Do your research, don’t just go by what you hear or read on the internet.

The first step to sensible investing is doing your research. This means, don’t just take someone’s word for it, don’t be afraid to ask questions and do your research.

It can be easy to get scared off or put off investing a large sum of money because you’re not sure where to start and assume it will be too complicated or expensive, but this isn’t necessarily true. If you’re interested in investing but don’t know where to begin, you must start by educating yourself about different investment options so that when the time does come, whether now or five years from now when your finances are more stable, you’ll know what types of investments are available and what kind would work best for your situation.

You can always invest in a financial advisor or even a friend or family member to help walk you through investing.

If you want to invest but are afraid of making mistakes, don’t worry! You can always have a financial advisor such as MA Financial Consultants to help you choose your investments and manage your portfolio. You can also learn a lot by reading books and articles about investing. If that’s not your thing, family members or friends who have experience in investing might be able to explain it to you in an easy-to-understand way. Even if they’re not financially savvy themselves, they’ll know enough about the topic so that they can still be good sources for information about sensible investing.

Save money first and foremost before investing.

Investing without saving is like building a house on sand. Your investments need something solid, such as cash, before they can grow into something larger and more valuable. If you don’t have savings, it may make more sense for you to focus on increasing your income or reducing your costs, or both, so that you have something left over each month after paying the bills and contributing toward retirement accounts. Only after that should you begin thinking about investing any extra funds in stocks or other assets whose value can rise over time (like mutual funds).

Tax-advantaged accounts are your friend.

What do we mean? Tax-advantaged means that the money you put into a particular kind of account gets to grow tax-free for a certain amount of time. If you have an Individual Retirement Account, pension plan, or other fancy-sounding acronyms for your retirement or college savings plan, this is what we’re referring to.

Tax advantages can help build up your savings faster, especially if you’re doing it early enough in life that compound interest will work in your favor! That being said, there are some drawbacks: You need to make sure that whatever type of account you choose has enough room for all the money you want to save over time so that it doesn’t get capped out (this varies depending on how old/rich/etc. someone is). Also, understand which kinds of investments count towards whichever type of account; sometimes they only allow certain types of investments while others accept more options. In any case though, if done right and invested wisely these accounts can help save both time and money down the road when taxes come due!

Stocks aren’t the only thing to invest in, there are many different types of investments out there.

There are many different types of investments out there. There are stocks, bonds, mutual funds, ETFs, and options. Each type has its risks and rewards. Some are riskier than others and some are more profitable than others but they all have different tax treatment and liquidity that can affect the return on your investment.

Don’t put all your eggs in one basket, especially when it comes to investing.

One of the most important lessons I learned in my early years as an investor is that you don’t want to put all your eggs in one basket.

Why is this? Well, if something happens to that investment, whether it’s a market downturn or some other unexpected event, you could find yourself losing a lot of money rapidly. You should diversify by investing across different types of investments, asset classes, and investment vehicles so that your portfolio will remain balanced if one part of your portfolio does poorly.

Find the right balance between risk and reward that you’re comfortable with.

When it comes to investing, risk and reward are two sides of the same coin. You can’t have one without the other, without taking a risk, there’s no potential reward. But while you might think that taking on more risk means getting more reward, this isn’t necessarily true.

Risk is often thought of as something negative or bad (and it can be), but it’s important to understand that risk is simply another way of saying “variability” or “uncertainty”—that is, not knowing all the possible outcomes for your investment.

Sensible investing is all about being smart with how you spend your money and what you use it for.

Sensible investing is all about being smart with how you spend your money and what you use it for. There are a few core principles that help keep investors on the right track, including:

• Don’t invest in things you don’t understand. If something sounds too good to be true, it probably is! Don’t invest in anything that seems like a scam or has no real value to anyone but those behind it.
• Don’t invest in things you don’t believe in. Think about what motivates you to buy an item; if there’s no real reason behind your desire for that particular product, don’t buy it just because someone told you “it will make you happy.” Do some research into how certain products are made and where they come from before making any decisions regarding which ones will best meet your needs as an investor, and remember: there’s no shame in wanting luxuries (they can even be good investments). But always go into any investment knowing exactly what’s at stake and why it matters enough for them to risk their hard-earned cash on such an item or service instead of something else more practical for their lifestyle needs (or retirement savings).

What’s stopping you from sensible investing? Take that leap of faith.

Find out more about sensible investing from MA Financial Consultants today.