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10 Best Investing Tips for People Who Don’t Follow the Market




Even if you have zero interest in the stock market, you can still reap the rewards of investing. For the vast majority of Americans, investing isn’t optional; it’s the only way to amass enough money to retire someday. Here’s what to do if you want to build wealth without keeping track of what’s happening on Wall Street.

1. Set an investing budget

Before you decide what to invest in, you need to decide how much you can afford to invest. Taking advantage of free money in the form of your company 401(k) match is always a good first move.

But beyond that, try to build a six-month emergency fund that you keep in a bank account or CD. That helps you avoid losing money because you won’t have to sell investments when they’re down if you encounter an unexpected expense. Once you’re ready for an emergency, try to invest about 15% of your pre-tax income, though you may need to aim higher if you’re getting a late start.

2. Invest regularly a little bit at a time

One secret of successful investors: They invest no matter what the stock market is doing, using a practice called dollar-cost averaging. That means you commit to investing a certain amount at regular intervals.

If you have a 401(k), you already do this through payroll deductions. Same goes if you automatically fund an individual retirement account. Sometimes you’ll invest when the market is up, and sometimes you’ll invest when it’s down. But you can reduce your overall investment costs because you lock in some of those low prices.

3. Accept some risk

Whether you just don’t care about the stock market or watching it sends you into a panic, investing in stocks is the only way to achieve the growth that will build a nest egg. Bonds are safer than stocks, but low risk comes with low returns, especially given today’s rock-bottom interest rates.

One good guideline is the Rule of 110: You subtract your age from 110 to get your ideal allocations of stocks to bonds. If you’re 30, you’d aim for 80% in stock investments and 20% in bond investments.

4. Invest in S&P 500 index funds

An S&P 500 index fund is one of the most surefire ways to build wealth. Rather than cherry-picking stocks, you’ll automatically invest in 500 U.S. large-cap companies that have to meet stringent criteria to be listed in the S&P 500 index. Some of its biggest names include Apple, Amazon, Microsoft, JPMorgan Chase, Johnson & Johnson, and most recently Tesla. A $10,000 investment in the S&P 500 at the beginning of 2001 would be worth around $43,500 today.

5. Keep your expense ratio low

To find out if you’re overpaying for fees, look at the expense ratio for the funds you choose. Anything under 0.1% is good. A 0.1% expense ratio means just $1 of a $1,000 investment is going toward investment fees. But you may be able to lower your fees even further. In fact, Fidelity now offers four index funds with no fees at all.

6. Avoid individual stocks if you don’t want to do research

Individual stocks can help you earn even better returns than those S&P 500 funds. But avoid picking stocks unless you’re actually willing to research them. If you chase big returns by investing in the latest hot stock, you’re likely to overpay.

Investing in penny stocks (dirt cheap stocks priced at a couple of dollars or less) is a bad move no matter what your level of experience. Those stocks are usually cheap because the company that issues them is in trouble or they’ve never been profitable. Your risk of losing your entire investment is incredibly high.

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Linda Barbara

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