Risk Management, Trading & Portfolio Strategies

Financial tips every investor should know

Do you know the basics when it comes to saving?

Do you know the basics when it comes to saving?

If you're interested in building wealth that will give you a comfortable retirement and benefit your heirs, you know that the process takes thought and hard work. As we enter a new year, make sure that you keep all of the following suggestions in mind as you make plans for your financial future: 

  • Always pay yourself first – Before spending your money or even investing more in the stock market, make sure that you set aside at least a small portion of your income to put in an easily-accessible savings account. You should ideally have three to six months worth of living expenses saved in case something unexpected happens. 
  • Create a portfolio that can survive any environment – Financial advisors often suggest that the percentage of your portfolio invested in stocks should be your age subtracted from 100. For example, a 40 year old should have a 70-30 stock to bond balance. This portfolio allocation can vary and include other assets like currency and commodities depending on your tolerance for risk and portfolio volatility. Creating this type of balance can keep your funds safe from major market fluctuations. 
  • Draft life documents – You should meet with an estate lawyer in order to have a will, living will and power of attorney drafted. This will prevent any disputes over your wishes. In the same vein, you should also keep an up-to-date list of all of your beneficiaries named on your retirement account. 
  • Know what you're getting when you hire a financial advisor – If you decide to use the services of a financial professional, make sure that you know how they are getting paid and whether or not they are investing in the companies that they have suggested to you. You should consider asking a friend or relative to refer you to a fee-only advisor. 
  • Learn about the tax code – There are many ways to reduce your tax liability if you are aware of what is available. You should either take some time to learn about IRS regulations on your own, or regularly meet with a tax attorney. 
  • Purchase life insurance – This may seem like a strange bit of advice, especially if you have savings in various forms. However, life insurance is necessary if a tragic event occurs. Your family may not be able to easily access funds that you have that are tied up in the stock market or a tax-deferred retirement account. Life insurance can provide much-needed income to pay off debts and keep up your loved ones' standard of living.
  • Take advantage of all tax-deferred retirement plans – If your employer offers a 401(k) or 403(b), you should be using it at least up to the point where you max out the company match. Next, you should consider placing additional income in a Roth IRA. 
  • Think beyond real estate – The housing crisis that we have just recently overcome should remind everyone that there are other places to put your money than into a house. Of course, if you're just interested in moving your family into a more comfortable home, there's nothing wrong with that, but remember to be cautious. You should ideally stay in a home for at least seven years to reduce your risk of losing money if the market turns sour for a few years.

All of the above tips can help you become a wiser investor and increase your success at saving for the future. To continue keeping your funds safe in the stock market, use SmartStops' portfolio management software

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