Top tips for how to multiply your money. It’s a basic rule of investing that to improve your chance of a better return you have to accept more risk. But you can manage and improve the balance between risk and return by spreading your money across different investment types and sectors whose prices don’t necessarily move in the same direction – this is called diversifying. It can help you smooth out the returns while still achieving growth, and reduce the overall risk in your portfolio.
Investors often place great importance on price-earnings ratios, but placing too much emphasis on a single metric is ill-advised. P/E ratios are best used in conjunction with other analytical processes. Therefore a low P/E ratio doesn’t necessarily mean a security is undervalued, nor does a high P/E ratio necessarily mean a company is overvalued. Some mistakenly believe there’s less to lose with low-priced stocks. But whether a $5 stock plunges to $0, or a $75 stock does the same, you’ve lost 100% of your initial investment, therefore both stocks carry similar downside risk. In fact, penny stocks are likely riskier than higher-priced stocks, because they tend to be less regulated.
Funding your retirement is one of the best investments that you can make to ensure the financial future of you and your family. It’s important to plan for your retirement whether you have just finished high school at 18 or are about to enter your 60’s. It is never too early to start putting money away for your retirement. If you are planning on living a comfortable retirement based on Social Security; forget about it! According to USA Today, the average Social Security benefit paid out to retirees is a paltry $1,324 per month, which amounts to just $16,424 per year. Read more details at Why you need a retirement plan.
If you’re on a tight budget, even the simple step of enrolling in your 401(k) or other employer retirement plan may seem beyond your reach. But there is a way that you can begin investing in an employer-sponsored retirement plan with amounts that are so small you won’t even notice them. For example, plan to invest just 1 percent of your salary into the employer plan. You probably won’t even miss a contribution that small, but what makes it even easier is that the tax deduction that you’ll get for doing so will make the contribution even smaller. Once you commit to a 1 percent contribution, you can increase it gradually each year. For example, in year two, you can increase your contribution to 2 percent of your pay. In year three, you can increase your contribution to 3 percent of your pay, and so on.
Buffett says that the hardest thing is to trust your investment decisions. You always think that others are right and you are wrong. Instead, you need to study and believe in yourself. To be successful, you need to overcome the fear and not pay attention to what others are telling you. Accumulate knowledge and make investment decisions on your own to stand separate from the crown and be a winner.
About MultiplyMyMoney : I have more than 12 years of experience as an independent and personal financial and investment consultant. I used to run a financial blog called BuylikeBuffett which provided insight on investing, saving, money management, and all things finance. I am also the author of Your Financial Playbook: A Guide To Navigating The World Of Personal Finance a financial guide written to inform the beginning investor about the basics of the market. I decided to start a new site because I receive a great number of questions about financial topics on a daily basis. I figure that this would be a great way to answer those questions and increase financial literacy. I also figured it would be a good platform to write articles on everything from teaching how to get rich, explaining the basics of cryptocurrency, to detailing ways of rebuilding your credit score. I was the founder and president of New Horizons Financial Management, LLC, and was a registered investment advisor. New Horizons was an independent investment advisory asset management and personal financial consulting firm offering investment advisory services to high net worth individuals. Read extra details on Multiply My Money.