Do you want to become a Wall Street whiz? There’s no doubt that enjoying profitable shares of Twitter as you munch on your breakfast without lifting a finger is an ideal scenario, but that is seldom the case. Like anything, it takes work and some know-how to be successful.
Whether you are a stock market enthusiast or just looking to get into the game, seeking the advice of a financial advisor is a common move. With a financial advisor’s help, you can infiltrate the market and get to know the ins and outs of its workings. However, advisors often refrain from indulging a little extra information about the market.
Below are five tips that financial advisors sometimes try to keep from their customers. Keep in mind that these ideas are not all there is to know and won’t guarantee 100% success. Still, they are a start to a long journey.
Use Index Funds
An index fund is a collection of stocks or bonds created with the sole purpose of simulating the structure and performance of a financial market index. These funds sustain lower expenses and fees than actively regulated funds. They support a yielding investment plan. Some keynotes to pay attention to while deciding on mutual funds to invest in are:
- Low Expenses. Investors are always keen on choosing the best low-cost funds on the market without any commission or sales charge.
- Diversification. Investors are shrewd enough to protect their interests from the climaxes of the bear market by keeping their portfolio fairly diversified between stocks, bonds, and cash.
- Defensive Sectors. Defensive sectors such as health care and consumer staples are parts of the market that can hold up better during times of hardship and weak economy.
With that being said, the main criteria for investors will always remain the stock’s expense. It is fundamentally important to keep fees low to produce high returns in the long run. So the question really is: why pay extra for the same bundle of stocks when you can profit from high yields with lower costs?
Stocks May Not Be Safe for the Long Term
When analyzing the stock market’s flow through charts and graphs over lengthier periods, we realize that the market may increase or decrease by 50% in one year, and consequently, your return may fluctuate over 20 years. Although these numbers may seem appealing, what advisors won’t tell you is that stocks may not ensure better yield from other alternatives over 20 years. Maybe stocks won’t “waste” your money per se, but that doesn’t indicate a surefire return on your investment.
Always Pre-pay Your Debts
Advisors who charge a percentage on your assets will want your investment portfolio to be as extensive as possible. That is because operating a widely diverse and large stock collection will ensure big bucks to them. Your financial advisor may encourage you to keep your money tied up in the stock market, under their control, instead of paying off your ongoing debt. It may often be more sensible to repay your debt to forgo any further interest and fees rather than binding your cash to one specific investment. However, this all depends on several risk management factors, investment allocation, the term of your loan, and the borrowed amount’s interest rate.
There are More Options to Diversify Your Retirement Income
For some, the stock market has the potential to be a fruitful investment path. With that said, stocks are not the only method for growing your money. Safer options such as rental property may provide a more relaxed and guaranteed return. Rental properties are a different type of investment than the stock market, and they hold their myriad of challenges.
Just as you should diversify your stock market portfolio with a collection of diverse stocks and bonds, you should also be doing so with your attempts to supplement an early retirement income plan. From rental properties, to part-time gigs or small business enterprises, financial advisors are often omitting to inform you about your various revenue opportunities.
A financial advisor charging a percentage of profit from your assets may not notify you about this because it is much more profitable for them to keep your cash confined to the stock market.
Do Your Own Research
While some investors might think they hold the sixth sense for locating good companies, it doesn’t hurt to take matters into your own hands every once in a while. When you’re thinking about undertaking as daunting a task as piercing the stock market, it’s essential to do your own research.
While planning to allocate your hard-earned cash into stock, you will need to prioritize shrewd research to determine whether the company is generating enough profit, maintaining a healthy cash flow, and keeping its customer satisfied. You can do this by reviewing the stock’s financial reports, which will, in turn, help you to perform a well-educated decision regarding your investment. Whether you are looking to break into the stock market or merely read up about their constant fluctuations, here are a few of the essential stock market websites to visit during your research:
- The Motley Fool
As Warren Buffet said, “Success in investing doesn’t correlate with IQ … what you need is the temperament to control the urges that get other people into trouble in investing.” So, make sure to check your emotions at the door before you embark on the marvelously strenuous world of stock market adventures.