Seven Simple Tips For Smart Investing

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The following is a post by MPFJ staff writer, Toi Williams, who is a professional personal finance blogger from Fine Tuned Finances. She has backgrounds in personal finance, sales, and real estate.
Many people are afraid to invest because they believe that investing is complicated and that the only people that make money investing are the people that have a lot of experience with it.  Fortunately, this is not true, as many people have made money investing by investing smartly and keeping things simple.  You do not need to read hundreds of annual reports or have a degree in economics to be a smart investor.

Here are some simple tips that you can use to become a smart investor.

Keep It Simple

Investors typically sabotage their results when they try to get too fancy with their investments because they usually complicate things with products that they do not fully understand.  Choose investments for your portfolio that you understand and that you have done your research on.  These are the investments that you can trust to perform profitably over time.  Even though the rate of growth may be slower with these investments, you are not assuming the outsized risks that come with the more exotic investment products.

A great example of an investing platform that keeps things very straightforward is You simply specify the asset allocation that you’d like to maintain, and they automatically rebalance your portfolio of passively managed index ETFs as the market fluctuates.

Begin With Your Retirement Fund

Funding your retirement should be one of your primary goals during your working years, so begin your investing by funding your retirement account with a percentage of your income.  Some retirement accounts allow the money to be taken on a pretax basis, such as an employer-provided 401(k) plan, and some companies offer their employees matching funds for their contributions, up to a certain percentage of their income.  Under certain circumstances, 401(k) plans and Roth IRAs allow you to access a portion of your savings penalty free, allowing you to buy a house or pay for a college education.

If you’re interested in opening up a Roth or Traditional IRA account, this can be done either at a traditional mutual fund company, such as Vanguard of Fidelity, or at one of the many discount brokerages available online, such as Sharebuilder (currently offering $50 of free money with a simple promo code), Scottrade, ETrade Financial, TradeKing, or TradeMonster.

Monitor Your Risk

Different types of investments have differing levels of risk associated with them, so it is important to regularly review your investments to make sure that you are not assuming more risk than you are comfortable with.  Although stocks often return more than bonds, with riskier stocks returning the most, you can also lose more very quickly if the stock does not perform as planned.  A good rule of thumb is to invest more in stocks when you are younger and as you age, gradually shift to safer bonds to ensure that you will have the money that you need for your retirement years.

Don’t Chase Results

Chasing results is a terrible way to manage a portfolio because there is a good chance that you will buy after the price has gone up and sell after the price has gone down.  Investors that chase results are always one step behind because they are following trends set by other investors.  A better strategy is to choose investments that are expected to perform over time and allow them to mature; selling once the investment reaches a predetermined point that will result in a profit.

Choose Low Fee Investments

The more you are paying in fees to a purveyor of an investment service, the less money there is for you.  You do not want to choose high fee investments because all of the money you make will be paid back in fees, dramatically decreasing your expected returns.  Do not make the mistake of thinking that a high cost investment will justify its expense with higher returns.  Take careful note of the fees that you are paying for each of your choices and do not be afraid to change something that you feel is costing you too much.

Diversify Your Portfolio

The types of investments held in your portfolio and the proportions in which you own them will matter more in the long run than the costs you are paying in fees for the investments.  In order to minimize your risk, you should hold a mix of stocks and bonds and should include some other types of assets in your portfolio.  Choose carefully to ensure that you are not overexposed in any one company, industry, or region.  You can achieve a well-diversified portfolio by choosing several low-cost funds or a single target-date fund.

Stick To Your Plan

Create a long-term plan for your investments and stick to your plan as closely as you can for as long as you can to reduce your risk and possibly even boost your returns.  Novice investors that go online to check the value of their portfolio every hour easily spook themselves out of long-term profits with minor downturns in the stock price.  If you have carefully chosen the investments in your portfolio, you should be able to wait out any market downturns and your stocks will recover with the market.


By following these simple tips for smart investing, you can create an investment plan that minimizes your risk while providing you with steady returns for years to come.  As long as you do your research and choose your investments carefully, you will be able to reach your financial goals and provide handsomely for yourself during your retirement years.  The trick is to choose the right mix of investments and fund them in proportions that do not leave you over-exposed to outsized risk.  As you learn more about the stocks and bonds you are holding, you can make adjustments to your portfolio to better meet your goals for the future.
How about you all? Have you tried any of these investing tips to improve your portfolio or diversify your investments?  What investing tips have worked for you?  Share your story below!

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  1. John S @ Frugal Rules says:

    Good tips! I've used many if not all of them currently or in the past. Sticking to your plan is a vital part of this along with keeping your emotions at bay. You want to be careful no to lock in losses when everyone else is running for the hills.

    • Toi Williams says:

      I agree that investors must stick to their plans as much as possible. If you are chasing results, you will always be one step behind.

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