Depending on where you are in your life, your investment strategy sill need to continually change and evolve. This is an investment strategies by age guide that can hopefully point you in the right direction throughout your investing years.
Investment Strategies for a 25 Year Old
Time – The good news here is that time is on your side and you can afford to be a bit riskier as you will probably be in the market during several bull and bear markets.
Avoid Losses – contrary to most beliefs, it’s not about hitting the homerun on a stock or fund, but more about avoiding losses that will help you reach your financial goals. It is far more important to know how to spot a bad investment rather than finding a good one.
Debt Free – Get debt free as early as possible. Debt is dumb. Clear yourself of debt before you begin investing heavily.
Don’t Rely on Social Security – Social security is NOT an investment. Social security is broke – there is no money left and you should not expect it to be available when you enter retirement age. Pretend it does not exist. Pretend it is a tax – whatever you do, do not rely on it.
Stocks over Bonds – this goes back to having time on your side. Stocks have historically outperformed bonds and with decades of investing ahead of you there is no reason not to invest in stocks.
Buy and Never Sell – you need to be in the mindset that when you buy a stock you will never sell it. Buy quality companies with great track records and you will never need to sell your stocks. Index funds, huge companies that pay dividends.
Don’t Time The Market – Say No to Active Trading – you need to be a disciplined investor and not a stock trader. Make decisions for the long term and avoid paying transaction fees. Make regular, small investments into solid companies at regular intervals and don’t try scheme or time the market.
Trust in the power of Compounding Interest