Everyone has an opinion in regards to investments. How do you know what’s sound advice and what’s not? While investing can be confusing for many, it’s important not to get caught up in the hype that’s out there. Do your own research into possible investments and weigh the pros and cons before making a decision.
To help you, there are some investments to reconsider, and some that are always good to live by.
Investment Advice to Reconsider
Real estate:You may have heard that real estate is a safe investment. The opposite is usually true. It stands to reason that property values would increase over the years, but history has shown several years of price declines in the real estate market. It’s pretty volatile, one that can change from one year to the next.
Diversification: Many advisors say to protect your portfolio through diversification, as some investments may lose value but others will increase. However, one global recession can wipe out that theory.
Money Markets:Many say these are fool proof and safe. Even 401(k)s are marketing these accounts as cash. However, this isn’t always true and they can experience some fluctuation just like any other investment.
Mortgage payoff:You may hear it’s not wise to pay off your mortgage. That’s because you have such a low rate of return compared with greater gains to be had in the stock market. However, if you fall victim to a declining market, remember that the bank can’t foreclose on a home that’s been paid off.
Advice You Can Count On
There are many nuggets of timeless advice that never seem to go out of style.
Develop a plan: It’s always wise to have a financial plan in place so you can understand clear-cut goals for the future.
Emergency fund: You will never regret having an emergency fund with liquid cash to cover up to six months of expenses. Then, in case of emergency, you won’t have to dip into savings or investments.
Live within your means:Spend less than what you earn and you can never go wrong. Then, if your income decreases or you hit a rough patch, you will be prepared. You may not like losing your job, but it’s even worse to lose your house.
Nothing comes without risk: Don’t ever think there’s no way you can lose money on an investment. There’s always a possibility, whether your broker is your best friend or the investment is billed as the next big thing. Keep tabs on your broker and know a FINRA attorney in case you are given bad advice and lose money.
In a nutshell, not all investment advice is good or bad. There are a lot of gray areas in between. Just do your own research, keep a clear head and listen to your gut.