People who just start investing sometimes are surprised to find their holdings don't smoothly move up, up, up after they've bought them. The fact is, the market moves up and down, and no investment is guaranteed to always be increasing in value. But you can tilt the odds in your favor of the outcome you're seeking if you simply follow the "3 Ds" of investing: diversification, dollar-cost averaging and discipline.
Let's take a look at these concepts:
-Diversification: Not all investments respond to the same events in the same way. For xample, negative economic news may hurt stocks, but help bonds. That's why it's essential to diversify your holdings among a wide array of stocks, bonds, government securities and money market funds. By balancing your mix of investments in line with your risk tolerance, you'll reduce the chances of being dragged down by just one asset class and at the same time, you'll give yourself more opportunities for success.
Dollar-cost averaging: When you dollar-cost average, you basically put the same amount of money in the same investments over regular time intervals. In other words, you're automatically savvy enough to buy more shares when they're on sale, and fewer shares when they're expensive. Over the long term, dollar-cost averaging can help you significantly lower your overall investment costs. And because you've bought extra shares when they were cheap, you'll be in an especially good position when their price goes up.
Discipline: To achieve your goals, you need to stick with your investment philosophy. In other words, you need to know your reasons for investing, your investment preferences and your tolerance for risk. When you're a disciplined investor, you won't let emotions such as fear and greed drive your decisions. And you won't be constantly reacting to the short-term events and market volatility that influence so many people. "Keep your eyes on the prize" has been a rallying cry for people involved in many different endeavors. And it's just as a good a motto for investors.
Whenever you're concerned about your investments, remember the "3 Ds" of investing. They won't let you make a killing overnight, but they can sure add life to your investment picture for years to come.
This article is provided by James E. Elvord, AWM, a financial advisor at RBC Wealth Management in Chicago, and was prepared by or in cooperation with RBC Wealth Management. The information included in this article is not intended to be used as the primary basis for making investment decisions nor should it be construed as a recommendation to buy or sell any specific security. RBC Wealth Management does not endorse this organization or publication. Consult your investment professional for additional information and guidance. RBC Wealth Management does not provide tax or legal advice.
Provided by James E. Elvord and RBC Wealth Management
RBC Wealth Management, a division of RBC Capital Markets LLC, Member NYSE/FINRA/SIPC
James E. Elvord, AWM, Financial Advisor, RBC Wealth Mgmt., 312-559-1738 or 800-683-3246, firstname.lastname@example.org .