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Getting back to the basics of investing

May 25, 2014
By LISA QUEENEY , The Leader Herald

In the world of investments today, there seems to be an endless array of strategies and game plans designed to help you make the most of your investment dollars.

With all the options available, you could very easily become overwhelmed. Interestingly, however, while there are always new ideas to consider, it's often better to stick to the basics when seeking consistent results.

Just as with other things we do, it often seems as though once we feel we've got a handle on the fundamentals it's easy to forget the simple things that got us started and instead chase after newer, more complicated ideas. To help make sure you stay on the right track and maintain your focus on investing basics, let's take a look at some easy ideas to help you in your efforts to build your nest egg. Following are five simple tips to consider:

1. Start early: When it comes to meeting your financial goals, time is definitely one ally you want to have on your side. Because of the benefits you can receive from the power of compounded returns, the earlier you start investing the better. The beauty of compounding is that by reinvesting your returns, you actually earn money on both your original investment and any growth you experience as well.

2. Stop procrastinating: In a similar vein, if you want to start saving early, you need to stop procrastinating. In the world we live in today, it's very tempting to want to spend our money now on all the cool things we can get our hands on. However, if we want to save for important things such as retirement or education, we may need to forego some of the pleasures of today in order to set money aside for the future.

3. Prioritize your long-term nest egg needs: In order to keep your savings on track, it's important to line up your goals in order of importance and decide how you're going to finance them. Most will be financed through savings, but others may require some debt. Say, for example, you carefully plan out your budget and realize you can't save for both retirement and college expenses. Borrowing to pay for college is most likely a better option than borrowing to pay for post-retirement expenses. Otherwise, you may have to work during retirement to help support yourself.

4. Pay yourself first: One of the most valuable axioms of successful investing is spelled out in this simple phrase. In other words, save before you spend rather than trying to save what's left after you spend. One way to pay yourself first is to set up a process that systematically deposits money into your investment account on a regular basis. Electronic funds transfers allow you to add to your investment accounts (including your IRAs) using deposits from your checking account that can be weekly, biweekly, monthly, etc. You can also have a portion of your paycheck deposited into your investment account every payday.

5. Participate in employer-sponsored savings and retirement plans: Using pretax contributions to your employer-sponsored retirement plan - such as a 401(k) - can really pay dividends, and if your employer offers a matching contribution, you're essentially getting paid to save. The money comes out of your paycheck before you can spend it, and some employers may also let you build a nest egg with payroll contributions to an after-tax savings plan.

These are just a few ideas to help you remember the basics when it comes to investing. No matter how much you accumulate, or how well-versed you think you've become, it's important to always remember the fundamentals so you can stay on the right course.

This article was written by Wells Fargo Advisors and provided courtesy of Lisa Queeney in Johnstown, NY at 725-3400. Investments in securities and insurance products are: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE. Wells Fargo Advisors, LLC, Member SIPC, is a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company.



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