- 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.
This article is about Basics
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