Thursday, October 8, 2009

Finally seeing positive gains on my investments

Back in January 2009, there was approximately a $2000 loss on my investments. I invested in various mutual funds through Primerica and I keep track of them on Quicken 2009 software. While $4000 is alot of money, I truly didn't lose anything since I didn't sell my investments or pull out of the market. Instead, I kept investing every single month. I maybe young and naive, but knowing how the market generally performs over time, I expect the market to rebound and see growth. During the entire time that the market was down, I was buying shares at a very low price. I am happy to report that there's now a $150 gain on my investment. Of course, the market can change in an instant, so I maybe back in the negatives again. But it doesn't matter to me what the value of my account is. It only matters when I retire in 30 to 35 years. All it matters to me right now is how many shares I can own.

To be honest, I really don't know what I'm doing when it comes to investing. But I listen to advice from others who have millions of dollars in their accounts and how they went from having nothing saved for retirement to having millions. These people I talk to were ordinary middle income people just like you and me, but did what other millionaires did to be financially independent. Here are some tips they gave me:
1) Set a long term goal. Investing is a long term strategy. Don't expect to see a huge return in one day or a month or a year.
2) Diversify your investments. Don't put all your money in one company. Invest in several companies.
3) Be discipline. Remember why you are investing and keep your eye on the prize. Don't listen to headlines. Present or past information does not predict future results.
4) Pay yourself first. Every time you get your paycheck from work, the first payment should be yourself. I personally max out my Roth IRA contributions every year and I also put money into other investments. I put away almost 30% of my monthly income into investments.
5) Use dollar cost average. By investing on a monthly basis, you will eventually lower the cost per share you own.
6) The more income you make, the more money you should put away.
7) Live below your means. Basically this mean don't try to live a life style you can barely afford by trying to show off how much money you make by buying expensive things, but have nothing in your savings. If you are funding your life with debt, you really need to sit down with a Primerica representative to help you get out of debt and do a budget for you.

I only been investing for 3 years and if I never met these people, I would of probably made some bad choices with my money. In fact, I would of kept all my money in the bank getting a lousy 0.50% interest on it and then pay tax on top of that. If investment choices were offered to me, I would of put my money in money markets and maybe bonds and get maybe 3 to 5% interest. But since I understand how Rule of 72 works and how powerful compound interest really is, I put money into more aggressive mutual funds and some conservative funds.

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