Q.  I’m a new investor. Should I factor in market caps or returns more heavily when deciding which companies to invest in?

A.  As a new investor, I’d recommend focusing on building a diversified, low-cost mutual fund (or ETF) portfolio.  Picking stocks is incredibly difficult to do consistently.  Index funds outperform the vast majority of professional, active managers.  Any hope that you or I could do better is probably unrealistic.

Instead of picking individual stocks, follow a few simple investing fundamentals like:

  1. Get yourself ready to invest by first paying off consumer debt and building an emergency fund
  2. Stay tax efficient
  3. Understand your personal risk tolerance
  4. Keep costs low.  The lower the fees, the more of your portfolio you get to keep!
  5. Re-balance periodically
  6. Stay the course!  Don’t bail out of the market when prices drop!

History shows us that regular investments, diversified across the equity markets and re-balanced periodically outperform other more “professional” investing strategies.

Get started today!  And good luck!

John is a CPA and personal finance coach.  Email your questions to john@60minutefinance.com.

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If you need confidential financial coaching for your particular situation, please contact John for a no-cost, no-obligation discussion of your needs.

 

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