Exercising Your Money

3 tips for investing in the stock market

Your own holiday bed-and-breakfast is finally empty after family members stormed the kitchen and hijacked the refrigerator.

All that is left of the holiday season is a full garbage can, a list of returns and the financial hangover the New Year brings.

But with Jan. 1 also comes a rejuvenated outlook on life — a list of new goals to reach and changes to implement.

And nowhere — save physical health — are resolutions more prevalent than in our finances. So, with 2008 staring you in the face, here are three tips for “exercising” your extra money by investing in the stock market.

Take it personal
Regardless of whether you invest yourself or hire the services of a broker or adviser, understand where your money is and why.

“My first rule is, ‘no one takes care of Ross’s money like Ross,” says Ross Jardine, founder of stockinvestor.com in American Fork. “You shouldn’t do something with your money that you don’t understand, even if you have people you know and trust working with you.”

That doesn’t mean you have to do it yourself to be successful, but you should know what’s going on with your money. In fact, financial advisers typically have protocols and tests in place to determine personal risk tolerance and investment preferences.

“The first thing we do is a risk tolerance analysis,” says Dave Young, founder of Paragon Wealth Management in Provo.

Taking your finances personally comes with a word of caution: money is emotional. As much as possible, try to leave the emotions out of your financial decisions.

The two emotions that most commonly creep into financial matters are fear and greed, Ross says. And neither is healthy in long-term investing success.

Build on a firm foundation
With emotions in check and education in balance, develop a strong, general strategy. Most stock market experts extol the virtues of diversification.

Diversifying — or buying stock in a number of companies across a number of industries — lessens risk.

One specific example of a simple way to diversify is in purchasing exchange traded funds. ETFs are funds that mirror a specified index (think S&P 500 or NASDAQ).

“ETFs are popular — especially for people just getting into (stock market investing) — because they’re pretty inexpensive and they give you a one-stock portfolio,” Ross says.

The trend is your friend
“Index funds from 1926 to now have averaged about 10 percent return per year,” Dave says. “That doesn’t mean there weren’t some up and down times, but overall, the growth is there.”

This gradually upward trend means that index funds work over a long period of time. Solid investing starts with taking advantage of trends. The market moves up, down or sideways. Ross suggests money isn’t made in trying to hit the turns.

“I’d rather sell too soon than too late,” Ross says. “You won’t go broke taking a profit. Remember, it doesn’t matter what the stock was worth. It’s what you sell it for that matters.”

If you have a strong, long-term strategy, riding the wave also takes patience. In the short term, the stock market may bring a loss. But, if you have years to invest, the trend will most likely carry you up.

“If you have a disciplined strategy you believe in, then give that strategy time,” Dave says. “Understand that even if you’re doing your own investing, it takes time.”

Because making money off of the stock market is optimized by time, start today.

After all, you can’t start any earlier than today — regardless of your age.

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