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Investing for Dummies

No, not another for dummies article! Yes, because Investing is Serious Business.

A little bit of knowledge is a dangerous thing and so is having more money than sense. People do the oddest things when it comes to their money. That is why Investing for Dummies is not quite as amusing as it sounds.

Investing for Dummies - Tip #1
Investing in the stock market is fun and a great past-time. FALSE

Without question the last reason anyone should invest their money is for fun. Individual investors making their own portfolio decisions need to weigh their choices heavily. Even multi-millionaires do not consider investing in stocks a form of entertainment.  While many individual investors receives a certain amount of satisfaction from making their own investment decisions, it is not always fun.

Investing for Dummies - Tip #2
Cash is a position. TRUE

The constant push to be 100% invested at all times is ridiculous. Get out of this habit and know that sometimes the best investment decision is to sit on the sidelines. There will be plenty of opportunity for playing the stock market another day.

Investing for Dummies - Tip #3
If 1000 is good, then 10,000 must be better. Wrong!

Isnít it odd that people think more is better? When it comes to investing, money management should determine position size.

Investing for Dummies - Tip #4
To maximize your profits, invest in Stocks. True

Historically, investing in the stock market beats every other investment vehicle. Stocks continually out-perform bonds.  Real estate investing may be profitable today and turn against you tomorrow.

Investing for Dummies - Tip #5
Stocks are volatile. True
True, and if you are risk adverse perhaps you would find greater comfort in Low cost mutual funds. That is another way to buy stock. In exchanges for a small fee you will have the advantage of participating in several stocks within a fund, while reducing your risk.

Investing for Dummies - Tip #6
Periodically, it is wise to sit back and evaluate current trading strategies. True.

Becoming complacent about your investment strategies is foolish. Continually evaluate and test additional
Trading options. What works in one market environment may fall flat in another.

Investing for Dummies - Tip #7
Diversify.  True.
There is no better way -- over the long term -- to lower your risk than diversification. While stocks or individual sectors might outperform in the short term, it is the undisputed truth that over the years focusing on short term gains has lost many an investor huge sums of money. Greedy investors hoping to make it big by investing everything in one investment vehicle, soon learn painful investing mistakes. While diversifying your investments won't bring you monumental returns in boom times, it also means that you won't go broke!

 

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