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We’d all love to identify the next hot stock before it blows up, earning enough to retire tomorrow. But that’s not how investing works for most people. It takes time and patience to build wealth in the market, advice many financial experts say their clients hate to hear.
We asked the pros for investing tips that often go ignored — be wise and heed their warnings.
1. Pay off your high-interest debt before you start investing
It’s entirely possible and OK to get your feet wet with investing before you pay off your debt completely. With one caveat: You’ll want to focus your energy on paying off high-interest debt first before you start investing in the market, says Lauren Anastasio, a financial planner at SoFi.
“Some might be disappointed by this advice because they like the idea of their money making money and find investing to be far more exciting than paying off their debt balances,” says Anastasio. “The mathematical reality is that high-interest rate debt is going to cost more than the returns that can reasonably be expected on even an aggressive investment portfolio. Dollar for dollar, your money is going to be more valuable paying off any high-interest rate debts than it will be trying to invest in the next hot stock.”
However, once that high-interest, “bad” debt is paid off, you can pay more attention to investing. If you have student loans or mortgage debt, it’s typically fine to invest while you pay those debts down.
2. It’s not about timing the market, but time in the market
When it comes to investing in the stock market, you shouldn’t focus so much on trying to buy at the right times, explains Riley Adams, a CPA, senior financial analyst for Google, and founder of The Young and the Invested. Rather, it’s about buying all the time. “Yes, the market will go down eventually. It’s bound to happen,” says Adams. “But, if held long enough, those funds will not only recover, but they’ll also go up more.”
Aim to tuck away a little bit each month into your retirement accounts, such as an IRA or 401(k), or into a taxable brokerage account that you don’t plan to touch for many years. Index funds are highly recommended by experts as relatively stable long-term investments.
There is a caveat: If you’re inching closer to drawing on your nest egg — for instance, for retirement or a home down payment — Adams suggests easing up on buying index funds. Instead, make deposits into an account with more risk-suitable assets. A financial planner can help you choose the best option.
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By: Jackie Lam
Title: 2 important investing tips financial pros say their clients hate to hear
Sourced From: www.businessinsider.com/personal-finance/financial-expert-clients-hate-important-investing-tips-2021-8
Published Date: Sat, 14 Aug 2021 08:39:00 -0400