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There’s a first time for every exchange traded fund (ETF) investor, no matter what your age. Here are some tips on how to begin your road to retirement as prepared as you possibly can be.
A good rule of thumb when you’re just starting out is to just “keep it simple.” Complex or poorly defined strategies may only hinder you when it comes time to make decisions. Our own strategy – trend following using the 200-day moving average – is easy to implement and follow. Whatever strategy you put in place, make sure that it’s one you can use.
Bukisa lists some of these tips:
- Have a clear goal for your financial lifestyle. This will help avoid indecisive moments later on down the road.
- Choose a mentor or a role model and figure out what their strategy is. At ETF Trends we use the 200 day-moving-average as a guideline: when a fund is above its 200-day, it’s a buy signal. When it crosses below or drops 8% off the high, it’s a sell signal. This eliminates any emotions that could cause you not to act as you should. Also, as Mike from The Oblivious Investor points out, as an individual investor you have the choice to move entirely into cash if that is what makes you feel comfortable.
- Know your own situation: your risk tolerance is, your tax status, your time horizon and where you are right now.
- Watch the news and keep your ears and eyes peeled for information that could impact your investments so you can be prepared to act.
- Understand the risks of your investments. You should always know how your ETFs work. For example, If it’s a leveraged or inverse fund, you need to understand who they’re for. If it’s an emerging market ETF, you should know which countries you’re holding.
This article originally appeared on ETFTrends.com.
