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Strategy
The Hottest Investment Tips
By Dwight Wanken
Registered Principal, Raymond James Financial Services, Inc.
Have you ever received a really hot investment tip?
How many times has it actually worked out?
"Not-so-hot tips" can throw a kink in your long-term investment approach. Here are some sound tips for the long-term investor:
Get started early
It’s impossible to stress this point too much! Despite other financial pressures, this can often make the difference in reaching your goal. Historically, stock values appreciate in the long run so investing over longer periods can help your appreciation potential with managed risk.
Establish a regular investment program
Even experts cannot predict when prices are low and on the rise; therefore, the best strategy is to invest a set amount every month. Like any other investment, this approach cannot protect from loss or guarantee a profit, but it may help to lower the average cost of your investment purchases.
Reinvest returns
By reinvesting distributions from investments, you may be able to increase your account balance over the long term. Assuming a positive return on your investment, you will realize greater benefits from the power of compounding. This is the concept of earnings on earnings.
Maximize tax-advantaged retirement plans
If retirement is one of your objectives, be certain to invest in an employer-sponsored retirement plan if you are eligible. Most plans allow pre-tax contributions and tax-deferred account earnings. Don’t forget about IRAs either.
Don’t be too "safe" during retirement
When you retired, preservation of capital was a steadfast financial planning rule. However, because of inflation, you should be more concerned with preserving your spending power. To keep ahead of the game you must take inflation and taxes into account for the actual amount of your investment return. “Safe” investments could be a losing proposition if they offer no growth potential.
Prepare for the long haul
Follow the plan. Don’t be tempted to over react to short-term market fluctuations. Chasing "hot" tips could damage your long-term plan.
Schedule regular portfolio checkups
Your financial portfolio may need gradual adjustment as your lifestyle changes. You should review your holdings with your financial advisor at least once a year. If you have a major life change (e.g. marriage, baby, job change or early retirement), make an immediate appointment.
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