If you want to grow your wealth in 2017 and in the years to come you have to have discipline. The discipline to follow a proven strategy to get you there. Now is a perfect time to look at the ways to do that even though we have a newly elected president and all the turmoil that may bring. Just ignore it and stick to your investment plan. I believe these investment tips of 2017 if you implement them will do just that:
#1 Have a savings plan while you are still working
I’m a do it yourselfer type of investor. Many out there would advise against it but it’s what I like to do. It’s a new year so let’s allocate a certain amount of your paycheque to investing. Make it automatic so it comes out of your account and into an investment account separate from everything else you have. This amount will vary but see if you can handle 10-20% for this purpose.
#2 Seek safety above all else
Invest in big established companies. During the downturn of 2008/9 these were the first stocks to recover. You want to have a stable of big boring companies in your portfolio. In the short term no investment is safe. It’s always best to stick to what you know and big blue chip dividend paying companies are the place to be for the long term.
#3 Spread your money around (diversify across all sectors)
I spread my money around and make sure I have exposure to all the main economic sectors. Banks, utilities, telecoms, real estate, manufacturing, consumer and commodity stocks. Again seek dividend companies in these sectors.
#4 Never chase hot stocks or hot tips
I just avoid these all together. The excitement will soon wear off and eventually these kinds of investments won’t work out for you. I’m investing for the long term here so I don’t want to put my retirement money at risk on some high flying gold penny stock.
#5 Understand how compound interest can grow your wealth exponentially
The sooner you start the more time you have to make your money grow.
A penny doubled every day for 31 Days = 10.7 million dollars.
This is powerful stuff. Of course a lot depends on your rate of return but it doesn’t take long for your money to grow once you get committed to it. Make 2017 the year you start to make compound interest work for you.
#6 Invest where you are paid (dividends wanted)
When you are researching companies to put your money in, look for a track record of at least 10 years of consistently paying out a dividend. Second of all, companies who announce plans to raise and grow that dividend. That way you at least have some idea when you are going to get a raise via that dividend. Some stocks you own will pay monthly, quarterly or in some circumstances yearly based on a special dividend. The other major benefit is your dividends receive special tax treatment and are taxed at a lower rate than ordinary income.
#7 Insurance products are not investments
Be careful taking advice from firms that are sponsored by insurance companies and even mutual fund companies. Their fees are high and they also plug in numbers to software that when they have a solution it usually ends up being a high priced product. You need life insurance to protect your family from income loss, you don’t need to invest in it exclusively. Yet I see this all the time where some of my friends only own a life insurance policy and think that they’re invested. There’s a big difference. Buy a life insurance company like I do and collect that dividend.
#8 Invest in your RRSP or Roth IRA
This is a great way to cut your tax bill and save money you have set aside for retirement. This is the way to go if you’re still working and want to cut down on the amount of taxes you pay. In the States they don’t have this problem as the Roth IRA is tax free. In Canada you will be taxed when you withdraw money from your RRSP.
#9 Use Bonds (fixed income) to reduce volatility
I always keep a fixed income component of my portfolio equal to 40%. I invest 20% in an all bond ETF and another 20% in a preferred share ETF. This yields me approx.3.5%. Right now interest rates are low but starting to rise so this payout will grow. The downside to this is that the amount you own starts to go down. This only matters if you are going to sell, which I’m not because I want that monthly income.
#10 Always keep your guard up
You will hear a lot of promises about investments that will pay you a higher rate of return if you just ‘Invest with me’.
“How would you like to invest along side of me and earn 8.6% on your investments” the TV blares out at you. What TV guy sales pitchman doesn’t tell you is the cost. Chances are the risk you’re taking by doing that is not worth the extra fees they charge.
For a lot of people the thought of going down this road of do it yourself investing is just too overwhelming. You may want to consult a qualified financial advisor to help you tailor your needs and help you sleep better at night. I believe if you follow the investment tips listed above you too can build wealth and have a comfortable retirement. You may want to investigate further and up your investment IQ by reading the following:
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Further Recommended Reading for DIY Investing:
What investment tips will you be following in 2017? I would love to hear from you in the comments below.
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