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Want to know the three things that will make you better than 99% of the investing population? It is not rocket science nor does is it require you to do anything out the ordinary. Here they are:
1. Start Investing Today
The sooner you can start investing the better. Don’t worry if you think you are too old or too young, the key is to start investing today. The reason for this is to allow compounding to work right away. Here is an graphic from H&R Block that explains compounding (a picture tells a thousand words):
Click to Enlarge2. Continue to Invest Through the Market’s Ups and Downs
The market is going to go up and down. The key is to not let your emotions through these ups and downs influence your investment decisions. By not acting on your emotions you will do better than 99% of investors out there. Take this quote from Peter Lynch into account:
—Peter Lynch, Worth (September 1995)
3. Diversify Into A Quality Asset Allocation
The two key items here are diversify and asset allocation and a properly diversified portfolio stems partially from your asset allocation. Diversification means spreading out your assets among non-correlated assets so as to spread your risk around. You do this by choosing an asset allocation that meets the objectives of your risk profile. It is the asset allocation of a portfolio that determines the future gains you can expect, as indicated in the following image which I have displayed many times before on this blog:
Click to EnlargeDiversify your investments into a well constructed asset allocation and you will be investing than 99% of investors.
Summary
There are some basic things that an investor can do that will put them far ahead of the majority of investors. Start now, continue to invest, and diversify into a well constructed asset allocation. Simple tips but very powerful.
(Photo Credit: zeth lorenzo)