When Considering Your Investment Strategy, Keep These 3 Rules in Mind
One day our 4-year-old son expresses his never-ending love for waffles.
The next he only wants to eat oatmeal bars. On Monday, his favorite toy in the world is the red truck, but by the end of the week he can’t put down his blue sports car.
For a preschooler this is normal, obviously, and there are no costs associated with changing your preferences. But as adults, being easily excitable and distracted can have dire consequences when it comes to managing your money. So how do you stay focused amidst a barrage of buzzy new investments and potentially life-changing opportunities?
Here are a few things for you to consider.
Balance is key.
If you don’t know by now, we’re big fans of investing in low-cost index funds. They’re affordable, reliable and boring. But that doesn’t mean there is no place in an investment strategy for cryptocurrencies, options trading or NFTs [non-fungible tokens].
Imagine your diet. A balanced approach may be to eat mostly healthy, nutritious foods while incorporating a few cheat meals every now and then. The same idea applies with your money.
Depending on your goals and financial situation, you may consider allocating a few percentage points of your portfolio to some of the riskier, more volatile investments, with the remainder in more proven, stable investments. This way you can rest comfortably knowing the bulk of your nest egg is backed by steadier asset classes.
Don’t believe the hype.
We’ve all seen the headlines: “Skateboarder Becomes Millionaire Overnight by Cashing Out Piggy Bank in Altcoin.” Or “Teenage Prodigy Sells NFT of School Art Project for $5 Million and Has Lunchroom Named After Him.” These headlines accomplish precisely what they’re intended to do—get you excited. But there’s more to these stories than meets the eye.
They don’t tell you about the people who lose thousands of dollars every day, or have their cryptocurrency stolen or lost due to glitchy trading platforms. There are no headlines about the vast majority of people who have burned time and money into creating digital art that no one ever purchases. In many ways, the media platforms that promote these clickbait articles should be viewed no differently than entertainment platforms.
Particularly today, being financially savvy also requires you to be media and technologically savvy. If you’re serious about taking your financial education to the next level, then consider subscribing to a respected financial news platform where you know the articles have been well-researched by credible journalists, editors and analysts.
With recent advances in technology and financial product innovation, it’s even easier to dabble in new, exciting investments without going all in.
For example, if you’re intrigued by cryptocurrency but don’t want to go all in, you might consider investing in publicly traded companies that are heavy players in the crypto industry or exchange traded funds [ETFs] that allow you to invest in groups of these companies so you don’t have to choose between the best performers. This gives you exposure to the entire crypto industry while minimizing the risk of owning individual coins.
Now there are even cryptocurrency credit cards that reward you in crypto, much like you would earn hotel points or airline miles. And it’s just a matter of time before there are a variety of cryptocurrency index funds for retail investors to add to their retirement portfolio.
The point is, change in the financial landscape is here and even more change is coming. It’s natural to be intrigued by all the buzz. But you shouldn’t feel obligated to completely reverse your strategy or try to play catch-up. The fundamentals of investing are as relevant today as they’ve ever been.
The more you can master your emotions, be patient and practice discipline, the better off you’ll be.
This article originally appeared in the January/February 2022 Issue of SUCCESS magazine. Photo by @DimaBerlin/Twenty20
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