The Five Rules of Investing

1. Invest for the long run
   
   • The more time before you need your money, the more risks you can afford to take with it. This means investing in stocks, bonds, and real estate.
   
   
   • Understand your risk tolerance.
2. Balance your investments
   
   • Fixed income (30%-40%)
     
     • Bonds, money market funds, certificates of deposit (CD)
   • Equities (60%-70%)
     
     • Stocks, real estate
3. Diversify your investments
   
   • To reduce your risk buy funds that hold a diverse group of investments rather than buying individual stocks, bonds, or real estate
     
     • Stock mutual funds
     
     
     • Bond funds
     
     
     • Real estate investment trust (REIT)
4. Shop around for low fees
   
   • Choose investments that have low expenses – they are the most important indicator of how well the investment will perform
   
   
   • As a rule, index funds have the lowest expenses
5. Educate yourself about investing
   
   • You are ultimately responsible for your own investing decisions
   
   
   • There are many resources to help you learn about investing

This handout was produced by Think Small (www.thinksmall.org).

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