Four Strategies to Improve Your Financial Situation
By Sasha Cekerevac for Daily Gains Letter |
When you are looking at your financial future, you need to do two things; create a solid long-term investment strategy and avoid investor mistakes.
Creating an investment strategy means analyzing your situation by coming up with a comprehensive plan, while, again, avoiding common investor mistakes. So let’s look at four strategies you should consider to improve your financial situation.
- Obviously, one solid investment strategy is to be actively involved in the stock market. One of the most common investor mistakes is not taking into account commissions. With the growth of online trading, commissions have decreased substantially. Anyone using a full-time broker should really consider the cost savings of going to an online provider.
- Along with the investment strategy of being active in the stock market, another one of the common investor mistakes is to invest in a high-cost mutual fund. With the growth of exchange-traded funds (ETFs), most asset allocation for an investment strategy can be conducted at a much lower cost.
- Credit cards are another area that many people think is obvious, yet many of us have fallen into the same old trap. An easy investment strategy is to pay off high-cost credit cards first. If you are paying an interest rate of 15%, any funds you have invested that are only earning three percent should be used to pay off the credit cards, as the yield is far lower than the cost of borrowing funds.
- Life insurance is another good investment strategy for the long term. I would recommend looking at term life insurance, which is much easier to understand and calculate, while also being cost-effective over the long run versus more complicated products.
As you can see, one of the common investor mistakes is paying high costs. By trying to reduce the cost level in many aspects of your investment strategy, you can boost your long-term returns.
Clearly, in each area much more research needs to be done, for each individual. There is no single overriding investment strategy that suits all individuals and their needs. One of the most common investor mistakes is not trying to reduce costs. If you add up all of the incremental costs you are paying, this is a substantial amount multiplied over 20 or 30 years.
Creating a long-term investment strategy is more than just trying to pick hot stocks. It is a comprehensive assessment of one’s portfolio and risk profile.
By eliminating some of the common investor mistakes, such as paying high costs or maintaining a large credit card balance, this will help achieve the long-term financial goals.
While most people believe there is some secret investment that will help them achieve their goals, the truth is that hard work and diligence in creating and structuring an investment strategy are the real keys to long-term financial success.