- Tax Planning
- Investments 1: Before you Invest
- Introduction
- Know the Steps You Should Take Before You Invest
- Recognize the Ten Principles of Successful Investing
- Principle 1: Know Yourself
- Principle 2: Understand Risk
- Principle 3: Stay Diversified
- Principle 4: Invest Low-Cost and Tax-Efficiently
- Principle 5: Invest for the Long Run
- Principle 6: Use Caution if You Are Investing in Individual Assets
- Principle 7: Monitor Portfolio Performance Against Benchmarks
- Principle 8: Do Not Waste Too Much Time and Energy Trying to Beat the Market
- Principle 9: Invest Only with High-Quality, Licensed, Reputable People and Institutions
- Principle 10: Develop a Good Investment Plan and Follow It Closely
- Understand the Risks and Benefits of the Major Asset Classes
- Understand the Risk and Return History of the Major Asset Classes
- Summary
- Assignments
- Investments 2: Your Investment Plan
- Investments 3: Securities Market Basics
- Investments 4: Bond Basics
- Investments 5: Stock Basics
- Investments 6: Mutual Fund Basics
- Investments 7: Building Your Portfolio
- Investments 8: Picking Financial Assets
- Investments 9: Portfolio Rebalancing and Reporting
- Retirement 1: Basics
- Retirement 2: Social Security
- Retirement 3: Employer Qualified Plans
- Retirement 4: Individual and Small Business Plans
- Estate Planning Basics
Principle 6: Use Caution if You Are Investing in Individual Assets
If you must invest in individual assets (and this is not a given), know what you are investing in. Do your homework. Spend time learning about the company, its financial statements, its management, its short- and long-term strategy, its domestic and global industry, and its competition. Realize that it takes hours and hours of diligent, careful research to investigate a company thoroughly. Do not take others’ word for it: do the research yourself. Of course, finding a great company is not enough—the stock must also be priced right. A great company whose stock is overpriced can still be a lousy investment.
If you do not have the time to research individual companies, invest in mutual funds that have many individual assets. If your mutual fund has ten stocks, you need to know those ten stocks well. However, if your mutual fund has five hundred or more stocks, you do not need to know those five hundred stocks well because each stock has such a small impact on your total portfolio.
Know what you are investing in. Make sure you invest with mutual fund companies that have built a tradition of meeting the needs of their investors. Work with good companies that have good products. Be very careful with your money and invest it wisely.
