Put your Money to Work Wisely

The wise and the rich both know that there are valuable uses for money besides just spending it. When applied prudently and shrewdly, money can become a very diligent employee. How can you make your money work for you? It's done, quite simply, by investing it. But, in order to ensure that your hard-earned cash is operating at a high level of efficiency, you need to be aware of not only the best investment practices to use, but also some of the most common mistakes made by average investors that can take a sizeable bite out of your returns. Here are some "Don'ts" to look out for:

• Don't start investing without a plan. Whether it's a 401(k) offered by your employer, an IRA or another investment vehicle, make sure that you have some type of plan for investing your money. If you simply deposit your funds into something without giving it another thought, you have nothing more than a glorified savings account. Let your age, family responsibilities, and the market determine how you'll invest your money so that you get the best return possible.
• Don't fail to take advantage of your employer's 401(k) plan, if one is available. Most employers offer some type of retirement plan that can be tailored to the needs of their individual employees. So whatever your circumstances, enroll and begin contributing to the plan as soon as you're able to.
• If you're young, don't invest too conservatively. For example, if you're in your twenties, there's enough time before retirement to place the majority of your money into higher-yielding instruments. If, by chance, you do lose some of your money, you still have plenty of time to recoup those losses.
• If you're older, don't invest too heavily in higher-risk securities. As retirement nears, you should adjust your investments to limit your exposure to risk of loss. You'll need the money soon, and there won't be time to gain back any losses that you may suffer. Now is not the time to play around with risky investments.
• Don't put all your eggs in one basket. You should have a good mix of stocks, bonds, and other investments in order to minimize your risk of loss and maximize your money's earning potential.
• Don't get too greedy with a winner or too stubborn with a loser – know when to get out. Riding the wave of a great stock to high profits is not only a fantastic opportunity, it's a definite rush, as well. The trick is to know when to get out and put your money into something more stable for long-term growth. On the other side of the coin, it's easy to continue to hope for a reversal as the stock you invested in sinks lower and lower with each passing day. No one likes to admit that they were wrong about something. But if you have to do it – cut your losses, and do it quickly. After all, it's your money that's going out the window.
• Don't succumb to the 'paralyzation of analyzation.' Many would-be investors don't take the plunge because they become overloaded with information and fearful of making a mistake, thereby forget that the biggest mistake here is usually not trying at all. Consult with an investment professional to limit financial mistakes.
• Don't attempt to invest with too much debt. If you've got a mound of soaring debt, pay it down (or off) so that you'll have the necessary funds to invest without causing financial hardship.
• Don't settle for high commission fees. They can dramatically eat into any profits you earn. Besides, for the number of stock trades that the typical person makes, commissions shouldn't be terribly expensive. If they are, find a more reasonable broker. There are countless options available, so shop around.