Scheil emphasizes that deciding to invest beyond a 401( k) or IRA should only be considered when you have reasonably maxed out your retirement accounts. He says, " This is because of income taxes. You cannot pass up deferred tax or even free tax benefits. Firstly, plan and decide how much you need to invest, where the [ extra money ] is coming from( a bonus, regular income, asset sale, inheritance, gift, savings account money, etc.), when you may have to use it or when you want the money, and how much risk you can withstand.”
2. Avoid focusing on daily market fluctuations.
“ New investors often focus on daily market cycles and timing the investing process. You will never enter at exactly the right time or exit at exactly the right time. Averaging dollar cost or investing at regular periods will tend to balance out the highs and lows,” says Scheil. The guiding principle is that if you are between 25 and 35, the market movements on any particular day will not overly affect the retirement money you expect to get 30 years after.
3. Before considering other investments, first understand completely your present portfolio.
Scheil offers a diagnostic list of questions to assess your situation:“ When you have extra money to invest, I recommend a quick evaluation of your current portfolio. Do you have a balanced diversification? Does your investment standing address your set goals? Do your investments perform reasonably against actual risks and the market conditions? Knowing the exact answers to these questions will help you decide if you should use your extra money into your existing investments.”
4. What you might actually need is not opening another account.
Regarding three various kinds of investments, Scheil gave these comments( These are his personal views; other experts may have other opinions, obviously.):
To open or not to open another account-“ You need a new investment account only if it is has a different name on the account or has a different tax status.”
To invest or not to invest in a particular business-“ I recommend diversification only if you personally own and manage the specific business you invest in.”
To invest in real estate or not-“ Investing in real estate is advantageous in a portfolio to serve as an optional investment with a stocks portfolio, up to a certain proper amount. Owning real estate yourself is great as well; however, it might end up difficult to sell and burdensome to handle.”
5. If you are considering new investments, determine what will succeed in 2040- 2050.
According to Scheil, the most appropriate choice for millennials wanting to improve their investing potential is to“ remain in the stock market for the long-term and consider buying during market dips”. Likewise, he strongly suggests that we think hard about what will gain long-term value when dealing with stocks.
“ Be guided by this simple test: What will be very valuable in the year 2050? What will earn a lot from now up to 2050? Renewable energy, bio-technology, goods and services for the