One Snarky Chica with Issues

If you are thinking about investing it is a good idea to come up with an investment strategy.

There are several different investment strategies. There is no right or wrong investment strategy - only what is right or wrong for YOU. With that in mind it is a good idea to be knowledgeable on the different investment strategies because being informed will help you to know what is right or wrong for you.

The Rule of 72

I am sure you have seen the rule of 72 mentioned elsewhere before now. If not, it is definitely something that you should know. The rule of 72 is what you use to see how long it will take for your money invested to double. Here is how the rule of 72 works - take your estimated rate of return and divide that into 72 to get the number of years it will take for your money to double. The catch here is that the rule of 72 makes the assumption that you are earning compound interest. So if you are hoarding your money in a sock drawer at home, this will not apply.

Diversification

Diversification is also something else that investors should know about. Diversification is simply dividing up your investment portfolio between several different investments. If done properly, you have lowered your risk. Note however that diversification does not guarantee an greater return.

Asset Allocation

If you want to take diversification one step further then you will want to know about asset allocation. Asset allocation is basically when you have your money spread out over several types of stocks - small cap, large cap, mid cap, international, growth and value. Why is this a good idea?

Well, spreading out your money like this will in turn reduce the overall volatility of your account and offer up the potential of greater return.

Here’s why - the small cap stocks can offer up some nice growth but if you are too heavily invested in them your money can fluctuate a bit more than you would want. If you were to go with fixed investments like bonds then you would have regular income but you run the risk of being too conservative which means you might not have a great enough return to meet your needs.

Dollar cost averaging

And do not forget about dollar cost averaging. I recently took a look at dollar cost averaging. Basically with dollar cost averaging you invest equal amounts regularly. And overall that lowers your average cost per share.

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Disclaimer: I am not an investment specialist, these are just some things I have learned along the way. Please contact a qualified investment specialist before acting on my advice