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Basic Principles for Investing

Basic Principles for Investing

September 01, 2022

Basic Principles for Investing by Wendolyn T. Forbes, CFP®

Investing money can be exhilarating and terrifying. We live in a time where there is a lot of information about investing and you, as an investor, have many choices. Where do you start?

Follow the money. What is your cash flow? How much money do you earn? How much money are you spending? Do you have money left over or are you falling short?

Ensure your basic financial needs are covered. When it comes to your financial situation, it is critical to cover the basics: paying your bills on time, having an emergency fund, paying down high-interest debt, and funding your retirement plan are some basic financial needs to consider.  

Revisit your savings plan. How does investing compliment your savings plan? How much money can you set aside for investing?

Understand investing. What are stocks, bonds, mutual funds? The National Association of Investors (NAIC) is a national 501(c)(3) nonprofit organization providing unbiased investment education and powerful online stock analysis tools to help investors. Learn more at www.betterinvesting.org.

Decide which approach you want to use when it comes to investing. Do you want to trade on your own? Many self-directed online brokerage accounts can be opened with $50. Do you want to work with a financial professional? Ask how she gets paid: a percentage of assets under management or commissions earned by recommending specific securities or both? Do you want to work with a fiduciary who does not earn commissions but charges a fixed rate for advice? Ask about her rate. Do your due diligence on that financial professional via www.brokercheck.finra.org.

Create an Investment Policy Statement. Define your investing how, what, why, when, where, and who to help guide your investment decisions.

Risk what you can afford to lose. When you invest, you choose how you invest your money, and your decision may result in you losing 100% of the money you invested. How much money are you comfortable investing?

In an ideal world, your emergency fund would be fully funded, your high-interest debt would be paid off, your retirement plan contributions would be maxed out every year, and you would have a positive cash flow every month. But the truth is that we don’t live in an ideal world, so we do try to do the best we can with what we have.

A CERTIFIED FINANCIAL PLANNER™ may help you do the best you can with what you have by creating a customized investment management plan unique to you and your financial situation.

Wendolyn Forbes is a CERTIFIED FINANCIAL PLANNER™ with Wealth Transition Finance, A Member of Advisory Services Network, LLC. Whether you are a do-it-yourself investor who wants to engage a professional for financial planning services or an investor who prefers to lean into the guidance of a professional for ongoing investment management, Wendolyn offers financial planning and investment management services for either a one-time or on-going cost. For more information about Wendolyn’s financial services practice, please visit her website at www.wtf-asn.com.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

This material is provided as a courtesy and for educational purposes only.  Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation.