- Patience is a big asset. Stock prices will always go up and down. The best investors overlook these short-term price swings and don't head to the investment "sidelines" when times are tough. Of course, this is easier said than done -- especially when the political and economic news of the day is bad and the financial markets seem rattled. Yet, history is full of wars, crises and scandals and not one of them has permanently harmed the outlook for investments. In fact, after the initial shock of the event has worn off, financial markets have often recovered lost ground in a matter of months -- and then gone on to new heights. Of course, past performance is not a guarantee of any future results.
- All investments carry risk. Everyone knows that stocks can lose value. But too many people don't realize that all investments carry some type of risk. For example, bonds and Certificates of Deposit (CDs) may offer substantial protection of principal, so they might be considered "safe." And yet, these same vehicles may provide returns that fail to keep up with inflation, which means they carry purchasing power risk. It's not the same risk as that incurred by stocks, but it's a risk nonetheless -- and it's something to be aware of if you are counting on your investments to provide you with some of your cash flow.
- Knowledge is power. Some people aren't really sure what they are investing in -- and that can lead to a variety of problems. For example, they might invest in almost exactly the same vehicles inside and outside their 401(k) plan, which could lead to an over-concentration of assets in a particular area -- leaving them vulnerable to a downturn affecting that one asset class.
- Professional expertise is valuable. Work with an investment professional who knows your needs and who will work with you one-on-one to create a personalized strategy.