As the Internet continues to change our world, many people are trying their hands at self-directed investing.
I think it's great that more people are taking an interest in the markets, but as a financial caregiver, I am compelled to share some tips that may just help people avoid making mistakes with their investments.
So, whether you've already made some trades or are thinking of joining the ranks of the online investors, you may wish to consider the following:
Know what you're buying. The rapid proliferation of investment chat-rooms and newsletters has led to a free-flow of “opinions” on what will be the next hot investment. As much as they sound like great tips, be sure to check things out before making your selections.
Limit your exposure. Invest no more than five percent of your overall portfolio in speculative investments. More importantly, you should know your limit and never go beyond it.
Consider it gone. Adopt the mindset that you could lose everything you put in speculative investments. This makes your winners more exciting and your losers less painful.
Don't spend it all in one place. Putting all your money in a single investment only increases your risks. So choose a few different investments, keeping in mind that as the potential rewards increase, so does the risk.
Go in with a plan and monitor. Always have a target price to get out with your profits or take a loss. Track your performance by watching the daily prices and news related to your picks. Also, track the value of your account relative to your overall account (keeping in mind the 5 percent rule).
And if it all gets too overwhelming to handle on your own, call me; I'm always available to help.
Regards and good luck.