3. Know your tolerance for risky business
Say the market drops, and you look at your balance and it's lower. "That's going to happen," says Will Branch, investment analyst for Millennium Investment & Retirement Advisors in Charlotte, North Carolina. If the mere thought makes you feel ill, imagine it really happening.
You might need to take some risk off the table. Branch recommends this rule of thumb to make your allocation more comfortable: Whatever your age is, take that number and use it as a percentage of your total holdings for safer, fixed-income investments like bonds.
4. No risk, no return
But if you think investing in stocks is too risky, consider this: Staying conservative to try to avoid market risks altogether can be a losing strategy, too. People who stepped out of the market and were afraid to return after the recession missed out on substantial returns, says Arian Vojdani, investment strategist, at MV Financial in Washington, D.C.
"The S&P 500 index has gone up by almost 13 percent in the last seven years," Vojdani says. "You shouldn't have all your eggs in one basket, but that gives you an idea of the return you're missing out on."
Staying out of the stock market also boosts your inflation risk. "The value of your dollar goes down over time as inflation rises," Vojdani explains. Investing helps "your money (to) appreciate in value. If you just have money in a bank account you are not making any money on your money. Your money is losing value over time."
Written by : Jill Cornfield (2016) Read more: http://www.bankrate.com/finance/investing/investment-tips/#ixzz4S079nCir
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