Here are 13 Tips to Help
you Invest Wisely
AMES, Iowa -- By following a few principles, you are more apt
to invest wisely. Here are 13 tips to help you increase your
investment knowledge and confidence, provided by Pat Swanson,
CFP® and families specialist with Iowa State University (ISU)
Extension’s Invest Wisely Project.
By setting specific investment goals you have a road map to
achieve financial success. Make your goals SMART – specific,
measurable, attainable, reviewed, and time-related.
Keeping good financial records may save you money on taxes and
also may keep you from worrying about finding appropriate information
when you need it.
Take advantage of compounding by starting to invest today. Invest
as much as you can and keep adding to your investments consistently
over a long period of time.
Keeping some funds in savings for short-term emergencies is
prudent planning, but taking more risk to invest is required
to possibly obtain higher returns. Balance the amount of risk
willing to take with the return you are aiming for. The higher
the potential return on an investment, the higher the risk.
Diversify to help reduce risk. Don’t put all your investment
dollars in one investment or investment category. Decide on an
asset allocation—the percentage to put into stocks, bonds,
cash—to meet your goals.
With stocks there is the potential for price appreciation and
dividends. It is important to do your homework before investing
in stocks. If you don’t have the skill or time to select
and monitor individual stocks or sufficient wealth to adequately
diversify by purchasing many different companies, you may want
to consider mutual funds that pool money from many investors
to purchase a basket of stocks.
Bonds provide known payments at specified times. Check the credit
worthiness of the bond issuer. Investors not having the resources
to diversify their bond holdings or knowledge in this area might
want to consider bond mutual funds.
Mutual funds give investors many advantages. A mutual fund company
provides diversification and the skills of professional managers
to select and monitor the securities within the fund. Select
a mutual fund with low fees and one whose investing objectives
and risk level match your own.
Investors should always understand the insurance product they
are purchasing and the long-term nature of the purchase when
considering any annuity. Always ask your agent for an explanation
of anything you don’t understand. Review the contract and
compare information for similar contracts, as well as comparing
A good way to save for retirement is to take advantage of retirement
options through your employment -- especially if you can
take advantage of an employer match. An individual retirement
account, or IRA, is another way to save for retirement by contributing
the maximum amount each year and achieving the benefit of compounding.
A 529 college savings plan is a good way to save for a child’s
or grandchild’s education. Withdrawals are exempt from
federal income tax when used for qualified higher education expenses.
Never make an investment decision on the spot. Proceed slowly
and cautiously. Take advantage of the Iowa Insurance Division
to avoid being a victim of investment fraud. Use their Web site
at www.investsmartiowa.gov or
call them toll free within Iowa at (877) 955-1212.
And for the final tip, Swanson says financial advisors can help
you invest. “Have well-defined objectives before you select
an advisor and be sure to check the background of the firm or
The ISU Extension Invest Wisely
Project provides a series of newspaper, radio, and web resources
for investors. It is funded by a grant from the Investor
Protection Trust (IPT). The IPT is a nonprofit organization
devoted to investor education. Since 1993 the IPT has
worked with the States to provide the independent, objective
investor education needed by all Americans to make informed
investment decisions. www.investorprotection.org.