So who has time to research stocks and mutual funds thoroughly… I damn sure don’t.

For example, if you invest in stock or mutual funds they are certain rules of investing we must follow. If you invest in stocks you must check to see if it has a good track record, if its mutual funds you must read and the prospectus carefully before you invest.

Below, I have listed Moolah’s 10 special tips on how to start investing that will help current and future investors along the way. Now, don’t get it twisted, these ten tips on investing are not the Bill of Rights of investing, or the 10 commandments. These tips are just my simple ways that will keep you ahead of the game, and provide good results in the future:

Tip 1: Know your risk tolerance: There’s an easy way to figure this out when dealing with investments, and that is after making that investment can you sleep at night? What I mean is when it’s all said and done, are you internally ok with your decision. My dad used to always tell me if something you’ve done keeps you up at night, it’s probably not right. So bottom line is if you can’t honestly live with the investment you’ve made, wake up the next day and get out immediately.

Tip 2: Join or Start an Investment Club: I’ve been part of my investment club for about 5 years now, and if it wasn’t for my group I wouldn’t be where I’m at right now with my investments. What’s better than meeting up with like minded people like yourself, and bouncing tips and strategies with one another? You could start a group with a few relatives or friends, and each member would get to research their own area of interest and give feedback to the group. This will create a better portfolio, and since everyone will be investing in the same pot, you money will grow faster. Basically like the old saying says “Two heads are better than One”.

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Tip 3: Stop acting like a day trader, and take a long term view. Unless you’re an aspiring day trader, or one already you should leave the instant tickers alone! Set a schedule to check you stocks like once a week, or every Monday morning and Friday evening. The reality is when your learning on how to start investing you will understand the stock market moves constantly with or with our knowledge. Keep to the buy and hold strategy and check you stocks periodically. Now, this doesn’t mean to buy stocks and forget about them. You need to check your stocks, and gauge their performance.

Tip 4: Invest regularly. Before going out to invest, one of my main tips of investing is to set out an investing plan. For example, set a plan to buy a few stocks per month or every other month, and stick to that plan no matter what. Historically, the key is to invest in small increments rather than one lump sum. Using this method, will achieve dollar cost averaging in the prices you pay.

Tip 5: Solid Research- not “quick tips” is the way to go. Don’t fall prey and listen to a financial analyst or colleagues telling you about a hot tip. 9 out 10 times, these stock tips will put you on your a$$. One rule of investing you should is to always avoid those stocks that Wall Street loves, because the reality is by the time you hear about it, the well has probably run dry. The key is to continue to do your solid research, and keep course with you investment plan.

Tip 6: Invest In What You Know: I have a background in technology and accounting, but a friend of mine recently gave me a stock tip to invest in a pharmaceutical company that is suppose to be coming out with a new wonder drug. Do you go out and invest in that stock? Yes, by all means go do a little research on the stock to see what the stock is all about, and if it makes sense to you. If you can’t make sense of it, stay away from it. Invest in stocks that make sense to you or in stocks where you good knowledge of. Take a page from Warren Buffet who never invested in areas he wasn’t knowledgeable about. A final note, that tip that my friend gave me has dropped by 30% in the last six months.

Tip 7: Have a Balanced Portfolio. You can build a successful portfolio over time if you spread you money over a number of different kind of investments. You should allocate a certain percentage to stocks for growth, bonds and CD’s (certificate of deposits) for income, treasuries and municipal bonds for tax advantages and safety. You could also have a few money market accounts for obtaining quick cash when needed. Balancing your portfolio will provide growth with your investments, and will lessen the effect of your losses.

Rule 8: Make Compounding Your Friend! A lot of people have believed and put into their heads that to make money in investing you have to start off investing with a lot of money. All I to have to say to that thinking is balderdash!! If you used the law of compound interest, and started investing just one dollar everyday for the past 30 years. You would have over 45,000 in your investments right now, assuming you made a yearly average 8% on your money.
Now the key question is how can you guarantee that I will make 8% on my investment every year? The answer is that I can’t guarantee you anything, but what I can tell is there will be good years where you will earn 10% to 20% on your money, and there will bad years where you only earn between 4% and 5% on your money. That’s why we say 8% because that’s an attainable return on your money. So strive for that!

Tip 9: Watch out for Company Stock. Here’s a scenario, you’ve been working for a company for the past 15-20 years. The company is doing well so they say… and you have invested all your retirement funding into this company that you trust and know so well. You wake one morning, and go to work and low and behold, you see the doors are locked. Can somebody say Bear Stearns and Enron! My advice to you is do not put your entire savings and retirement in the trust of one company. Unless your one of the head honchos of the company, and you know when the bottom is about to fall out right under you, I would only invest a small portion of your company’s stock in your portfolio.

Tip 10: If you can’t afford to lose it, don’t use it! Now I want you to listen and listen well Lassie…If your financial planner, or accountant, or your brokerage firm tells you investing with them will eliminate risk, and there not talking about treasuries or CD’s… Run for the hills! Every investment and I mean every investment carries some form of risk. So if you really don’t have the money to invest, because you’re in debt up to your eyeballs, by all means don’t invest in the stock market. Take care of your debt, and start planning to invest sometime in the future.

One example I can give you is from an investment I made a few years back. A friend of a friend (which is never good to begin with) was starting an investment group. The initial investment was $2500 to get in, with the potential to make 10x your investment within 5 years. So I did my research and decided to take the plunge and invest with his investment group.

Well, fast forwarding to present time, I would love to tell you that I made a return on my investment back and then some. But the reality is that I pretty much lost my $2500 investment. Supposedly the leader of the investment group fell on some hard times, and skipped town. Am I upset that I lost my money? Of course I am, but I knew the risk I was taking, and I could afford to lose the money. Now if I had invested 5-10K, I probably would be trying to chase this guy down and to give him the Bautista Bomb (I just love wrestling…lol) to his cranium!

So what’s the moral of the story? One, don’t invest it if you can’t afford it. And two, don’t ever invest money with a friend of a friend. But if can afford to invest, even if it’s just a little, you will be on your way to building some wealth.

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10 Special Tips On How To Start Investing And Become Wealthy is a post from: Moolah-Moolah