- It’s hard to cut back. Once you’re used to a certain standard of living, it’s difficult to go back. This is an excellent argument for socking away salary increases in savings.
- You’ll never be satisfied. There’s always something else you’ll want. If you can learn to curb your desires, you’ll reach your goals more quickly.
- Borrowings have to be repaid. With interest. A credit card is not free money.
- Fancy cars and expensive clothes aren’t a sign of wealth. They’re merely a sign of spent money. (Or, quite often, borrowed money.)
- Your family could prove to be your greatest liability. It’s not just kids: adult children can be a drain on finances, and so can elderly parents who haven’t saved for retirement. Encourage your entire family to engage in sensible personal finance habits.
- Investors face three enemies: inflation, taxes, and investment costs. Minimize their effects any way you can.
- Adding risky investments can lower risk. Contrarian investments can actually even out your portfolio’s performance over the long run.
- Diversification is a mixed bag. A diversified portfolio can perform well at times, but can be dragged down by poor performers at others.
- Not all risk is rewarded. If your diversified portfolio declines in value, you can bet it’ll eventually recover. That’s not always true with individual stocks.
- Most investors fail to beat the market.
- Change is costly. Any time you buy and sell investments, you’re paying a price. Only buy and sell when absolutely necessary.
- Your best investment strategy is saving. The more money you’ve saved, the more you have to invest.
It’s helpful to keep the basics in mind at all times.
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This article is about Basics
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