Back to the basics

If watch the myriad investment programs on TV today you will notice a wide array of strategies and game plans to help you make the most of your investments. It is easy to become overwhelmed with all of the information and advice available today; however, it’s often best to stick to the basics when seeking consistent results.

As with a lot of things, once we feel we finally have a handle on the basics it’s easy to forget those simple things that got us started and instead chase after newer, more complicated ideas. To help you stay on track, let’s look at five investing basics to help you stay on track.

  1. Start Early. Time is certainly an ally you want on your side when it comes to investing. The longer you have to receive the benefits of compounded returns the better. The beauty of compounding is that by reinvesting your returns, you actually earn money on both your original investment and any growth you experience.
  2. Don’t Put It Off. Everyday there are new toys and "need-to-have’s” that make it too easy to put off saving for the larger, important things in life, like retirement or education. You may need to forgo some of the pleasures today in order to set money aside for the future.
  3. Prioritize Your Needs. It is important to line up your goals in order of importance and decide how you’re going to finance them. Many goals will be financed through savings, but others may require some debt. For example, you carefully plan out your budget and realize you can’t save for both retirement and college expenses. Borrowing to pay for college is most likely a better option than borrowing to pay for post-retirement expenses. Otherwise, you may have to work during retirement to help support yourself.
  4. Pay Yourself First. Save before you spend rather than saving what’s left after you spend. There are too many things to spend money on today, and saving after you have purchased all the new toys may be detrimental. Instead you can set-up systematic deposits into your investment accounts on a regular basis, including your IRAs.
  5. Participate In Your Company's Savings and Retirement Plan. Using pre-tax contributions to your employer-sponsored retirement plan – such as a 401(k) – can really pay dividends, and if your employer offers a matching contribution, you’re essentially getting paid to save.

These are just a few ideas to help you remember the basics when it comes to investing. No matter how much you accumulate, or how well-versed you think you’ve become, it’s important to always remember the fundamentals so you can stay on the right course.

Mark Zagrocki is a Financial Advisor and Chartered Retirement Planning Counselor in Westlake. 

Wells Fargo Advisors did not assist in the preparation of this report, and its accuracy and completeness is not guaranteed. The opinions expressed in this report are those of the author and are not necessarily those of Wells Fargo Advisors or its affiliates. Wells Fargo Advisors, LLC. Member SIPC, is a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company. Investment and insurance products: Not FDIC insured/ NO bank guarantee/ May lose value 

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Volume 2, Issue 6, Posted 8:42 AM, 02.22.2010