Investing money can be exciting and also excruciating. As financial markets bounce wildly, a little less excitement might be just what the doctor ordered. If you’ve ever wondered how to invest wisely to better manage market fluctuation with confidence, you’ll find that a little homework will help you find some fairly straightforward solutions. Although you’ll never make the financial markets a safer place, wise investing decisions will help you respond with ease and avoid panic when markets experience turbulence.
Write down your goals. When beginning any investment plan, you should clearly define what you want to accomplish with your money, according to the Financial Industry Regulatory Authority. This will help you create an action plan to reach your goals and will weed out the thousands of investments that don’t help you meet your objective.
Match your goals to potential investments that historically have met your time frame and investment objectives. Look toward stocks, bonds and real estate for better long-term returns and money markets or CDs for short-term safety. Many investors prefer to purchase mutual funds because they provide instant diversification of your money and professional management. Search for funds that meet your goal by using one of the many fund screeners available online.
Find tax shelters. Saving into your 401(k) at work is a great place to begin saving for retirement because money goes into the plan before taxes are taken out and your employer may match contributions. If you don’t have a 401(k) available, use a deductible IRA plan. You may want to explore a Roth IRA for some tax-free investing options and 529 plans for college savings.
Dollar cost average into your investments. Because markets fluctuate, it can seem dangerous to make a large investment on a single day, only to potentially see it plummet. To avoid this, invest in smaller increments over a period of time. If the market drops you’ll be able to buy future shares later at a cheaper price rather than watch your entire investment sink.
Monitor your investment performance. Don’t panic if your investments lose money over the short-term. Instead, review your performance against similar investments. Use online investment sites to study how your fund has held up. If your manager isn’t keeping up with others, it may make sense to switch. However, if the market is down 5 percent and you’re only down 2 percent, your manager did a great job of holding onto funds until better conditions come around.