Betting on a hot stock isn't worth it - Deepstash
Betting on a hot stock isn't worth it

Betting on a hot stock isn't worth it

Despite news headlines on life-changing investments on one stock item like GameStop, it is too risky to make short-term bets with sizable sums of money on what a stock is going to do next. Instead, some of the most respected investors in the world have long said the best way for everyday investors to make money is to invest in index funds and hold those investments over long periods of time.

Most index funds offer low fees and will allow you to essentially buy the entire stock market. That way, if any one stock crashes it won't affect your portfolio. 

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MORE IDEAS FROM New To Investing? Here Are Some Common Mistakes To Avoid And Tips To Follow

There is no need to panic, even in times of big corrections in the market. With a diverse investment portfolio, you actually have an opportunity to make some extra money off of big swings in the markets by selling what has gone up in value and buying more of what's gone down.

Don't panic and sell everything just because the stock market crashes and you see other people panicking and getting rid of their stocks. That can do irreparable harm to your portfolio. Buying high and selling low is not a good way to make money.

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The key to everyday investing is diversification, which means owning different types of investments to spread out the risk. You definitely want to own stock index funds because stocks over time have always offered the best return. 

You need investments that can do well when stocks are doing poorly. These include Treasury bonds and real estate funds. 

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Checking in with a financial adviser is strongly recommended by experienced investors, but make sure you're speaking with a fee-only expert, who isn't receiving commissions for steering you into one investment over another. 

Once you find someone acting in your best interest, try to meet with them once a year or every two to three years. Find someone you can pay a flat fee for each visit. This will save you money in the long term.

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What is an Index Fund?

An index fund is an investment that tracks a market index, typically made up of stocks or bonds.

Index funds typically invest in all the components that are included in the index they track, and they have fund managers whose job it is to make sure that the index fund performs the same as the index does.

You can't invest directly in an index, but you can invest in a fund, through either an index mutual fund or an ETF. 

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Investment explained

An investment is a gamble: instead of the security of guaranteed returns, you're taking a risk with your money. 

You can invest in Shares, Bonds, Funds, Government bonds (gilts), UK property market or even Farmland, Vintage cars, Wine, Fledgling technology, firms or art.

For most, investing means putting money in the stock market.

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6 ideal investments for beginners
  1. If you have a 401(k) or another retirement plan at work, it’s very likely the first place you should put your money— especially if your company matches a portion of your contributions.
  2. A robo-advisor. These services manage your investments for you using computer algorithms and typically costs 0.25% to 0.50% of your account balance per year.
  3. Target-date mutual funds often hold a mix of stocks and bonds and automatically invest with your estimated retirement year in mind.
  4. Index funds are like mutual funds on autopilot: Rather than employing a professional manager to build and maintain the fund’s portfolio of investments, index funds track a market index.
  5. Exchange-traded funds. ETFs operate in similar ways as index funds: The main difference between ETFs and index funds is that rather than carrying a minimum investment, ETFs are traded throughout the day and investors buy them for a share price, which like a stock price, can fluctuate.
  6. Investment apps like Acorns or Stash.

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