Stock Market Tips for Long-Term Investors

The stock market rises and falls with the fortunes of the businesses it represents and the mood of the people trading them. That unpredictability drives some people out of the market and tempts others to treat it like a casino. Neither approach works well. These rules of thumb help keep investing on track.

Before you invest

1. Set a goal. Know what the money is for and when you will need it. A down payment in three years and retirement in thirty call for very different investments.
2. Build an emergency fund first. Cash set aside for surprises keeps you from selling stocks at a bad time.
3. Pay off high-interest debt. Few investments reliably beat the interest on a credit card balance.
4. Only invest what you can leave alone. Set limits so that a downturn cannot derail your daily finances.

While you invest

5. Expect volatility. Declines of 10% or more happen regularly, and deeper bear markets happen too. Plan for them rather than being surprised by them.
6. Don't chase what has already soared. Buying low and selling high sounds obvious, yet many investors do the opposite by piling in after big gains.
7. Diversify. No single company or sector should be able to ruin your plan. Broad index funds make this easy.
8. Watch costs. Commissions are gone at most major brokers, but fund expense ratios, spreads and taxes still add up.
9. Use limit orders for thinly traded stocks and outside regular hours, so you control the price you pay.
10. Be skeptical of hot tips. Stocks promoted online as about to "explode" are often the subject of pump-and-dump schemes. See Investing Scams to Avoid.

Over the years

11. Check in, but don't obsess. Watching every tick can lead to impulsive trades. Reviewing your portfolio a few times a year is enough for most long-term investors.
12. Rebalance when your mix drifts well away from your target.
13. Keep learning. Read company reports and fund prospectuses and understand anything you own.
14. Revisit your plan when life changes, such as a new job, marriage, children or approaching retirement.

There is no perfect moment to invest. Time in the market, steady contributions and sensible diversification matter far more than catching the bottom or the top.

Sources

• Investor.gov: Diversify your investments
• Investor.gov: Types of orders
• Investor.gov: Pump-and-dump schemes