In this U.S. News & World Report March 2020 article, financial advisors offered their 10 best tips for beginning investors.
Mike Hennessy, CFA, CFP®’s tip was to get to know your risk tolerance. "You should only take as much investment risk as your investment goal requires and your stomach can bear," he said. "Just because you can afford to take more risk with your investments doesn’t mean you should."
Your level of risk is determined by your allocation to stocks and bonds; more stocks equal higher risk. The allocation you choose “is similar to how fast you choose to drive your car,” said Hennessy, founder and CEO of financial advisory firm Harbor Crest Wealth Advisors in Fort Lauderdale, Florida. “While your allocation should remain relatively static — no one would want to go from 65 mph to 35 mph in a few short seconds — it should adjust over time as you approach your investment goals."
Here are financial advisors' 10 tips for beginning investors:
1. Start now.
2. Don’t let the media scare you.
3. Focus on your savings percentage, not your portfolio performance.
4. Set investing goals.
5. Use your investing goals to determine your time horizon.
6. Get to know your risk tolerance.
7. Start with broad-based investments.
8. Keep costs low.
9. Don’t be afraid to ask for help.
10. Automate as much as you can.
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