How can i invest wisely?

Question

How can i invest wisely?

Answer 1

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Answer 2

read "The Intelligent Investor"

Answer 3

1. Do not chase past returns. People that buy funds because they have done well in the past are doing exactly that.

2. Do not market time. Market timing is buying based on your (or your newsletter, or your TV, or neighbor's) guess about what is going to happen in the future. Even if someone knows something, you've already missed the boat. The price already reflects what you just found out.

3. Use index funds. Over time, index funds outperform actively managed funds, mostly because they do not have those high expense ratios. Some actively managed funds do beat their index, but the ones that do usually do not do so consistently. So why gamble? Use index funds. If you want to use a few actively managed funds, make sure that the costs are very low. Vanguard has some good ones.

5. Diversify. Don't put all your eggs in one basket. Own a mix of bonds, domestic equities (large, small and mid cap funds), an international fund and perhaps a REIT (Real Estate Investment Trust) and emerging market fund.  Four to six funds is all you need. Know your risk tolerance and set up an appropriate asset allocation. Rebalance as needed.  

6. Consider taxes. Use the least tax efficient funds in your tax-deferred accounts and the most tax efficient funds in your taxable accounts.

Bottom line: Set up a tax friendly, low-cost, diversified portfolio based on your risk tolerance and then, as they say, 'stay the course'.

Answer 4

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