Each of us has a very special relationship with our money. Whether it was a family member, a work colleague, or somebody famous, the lessons we learned from our investment role models shape the way we think about our money decisions later in life. Fortunately, I had an unbelievable role model in my very first job out of college. My previous boss indelibly etched three powerful principles back in 1991 that guide my investment decision making more than 20 years later.
- Pay yourself first. As simple as this seems, he forced me to begin deducting $166.66 a month into an IRA account when I was just twenty one years old and struggled to make those payments each and every month. No matter how much or how little money you make, one of the most powerful lessons is to take the savings off the top and then learn to live off the rest. Take a third of every raise and add it to your systematic savings.
- Dollar cost average. There are many investors who attempt to time the market. Even today, investors debate about whether the market is overpriced at this time. However, by systematically saving your money on an ongoing systematic basis through payroll deduction you get to take advantage of the ups and downs in the market over time. A very powerful lesson at all levels of investing.
- Diversification. Investment products weren’t as complicated twenty years ago as they are today, but this principle is an important one to learn with your investment portfolio. Never put all of your eggs in one basket whether it is one stock, one asset category, or one business. For the few big time winners there are many that have lost their fortunes by not implementing this strategy.
Dollar Cost Average and Diversification does not ensure a profit and does not protect against loss in declining markets. Investors should consider their abilities to invest during periods of fluctuation price levels. Past performances are no guarantee of future results. Investment value will fluctuate with market conditions.
Written by: Ted Jenkin
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