How To Invest Successfully
Once you have identified investment ideas and found something into which you want to put your money, the next step is to make sure that it fits with your overall portfolio. It doesn’t do any good to add another cheap oil stock if you already have 70% of your portfolio invested in the energy sector. That isn’t diversification.
Look for businesses with good returns on equity. Don’t fall into a peak earnings trap. Pick up tricks along the way, such as this tip for comparing the intrinsic value of two stocks.
Basically, just take advantage of tax shelters like your 401(k) plan, invest as much as you can, get free matching money, and let time and compounding do the rest. Control your expenses so you aren’t paying a lot to banks and brokerage firms. It’s really not very hard, to paraphrase one of my favorite investors.
How To Invest Successfully originally appeared on About.com Investing for Beginners on Monday, April 30th, 2012 at 06:43:00.
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