The stock market was up 28% in 2021 and 260% in the last decade.
Here are 3 tips to get started investing safely.
1. Don’t look for the perfect stock!
Tesla may be up 46% over the past year, Apple up 30%, but don’t be distracted by the high flyers.
Instead, look for stability with a broad index of the stock market, whether an index of the Tel Aviv 35 ( TA-35), the technology sector index, Nasdaq (stock symbol: QQQ) or the 500 largest companies in America index, the S&P500 (stock symbol: SPY) all of which can be bought from Israel.
Owning a broad index of the market, which historically has returned an average of 10% per year over the last 95 years, is one of the key wealth building strategies and often outperforms individual stocks.
70% of professional investors, whose job it is to find great stocks, on average don't beat the market index.
2. Do NOT invest a lot of money at the same time, instead do this....
Invest slowly at first using dollar cost averaging (DCA). This is a strategy whereby instead of investing all of your money at once, you invest smaller amounts, at regular intervals, consistently, regardless of the underlying price.
This is how the money you contribute to your pension is invested, as a fixed amount, put in monthly from your paycheck.
Example: If you have 1.2K nis to invest, rather than investing it all together (which is called lump sum investing), you would invest 100 nis, each month, for the next 12 months.
In the case of a stock market crashes it is one of the most effective investing strategies.
3. Knowing your time horizon protects your money, here's why...
In the last 90 years the stock market goes up over 70% of the time, its a FACT. But crashes occur, on average once every 6 years. Crashes are relatively rare, and every crash in history has been followed by a recovery.
If you can let your investments stay in the market and grow, you can avoid the main risk investors face with a short term horizon.
It is impossible to predict exactly how the stock market will do in the near term, but over time, it has always moved higher. If you need your investments to grow in the next few weeks, to buy a new car, then investing creates unnecessary risk. However, if you allow your investments time to grow, you will reap the benefits.
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