The basics of investing – follow fundamentals

Three proven strategies, + one, that increase chances for success

The news of the financial crisis continues, with some saying that the recession is easing, despite the continuing news of growing unemployment. People are scared; people are confused. Questions continued to be asked, “Where should I put my money?” “What should I do to rebuild a crushed portfolio?”

Despite what people may fear about Wall Street and the recovery of one of the worst economic times in the history of the United States, and as much as it may appear that something different has to be done, drawing upon our past is the easiest and smartest thing to do.

For young adults all across the country it is quite simple: first and foremost, take responsibility for your future by learning as much as possible about personal finance. It truly is one of the most important life skills one can possess. Second, follow the basics of investing, adhering to the long established fundamentals: asset allocation, diversification and account rebalancing. The plus one that needs to be included is – START EARLY. It is simple: the earlier one begins to save money the greater chance one will have at a successful financial future.

Asset allocation is the process of saving money in different investment classes such as stocks, bonds, money market accounts. Diversification is insuring that a proper variety of investment categories (e.g. small companies, technology, utilities, world funds) make up a portfolio--not ‘placing all your eggs in one basket.’ Lastly, on a periodic basis, (once a year) a review should be conducted of the portfolio and changes should be made to keep the fundamentals in line, known as account rebalancing.

These fundamentals were recently reinforced by T.RowePrice financial planner, Stuart Ritter CFP, stating, “What’s important is to recognize that while trends are generally temporary, the fundamental principles of investing are the bedrock of a solid financial plan.”

The earlier young adults can master vital money management skills, including these three fundamentals of investing, the better off they will be as they journey down the path of their financial future.

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