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Be Thankful for These Top 5 Investing Tips This Thanksgiving

Nov. 21, 2012
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by Susan Lyon

Note: The New York Stock Exchange and related markets will be closed Thursday, November 22 for Thanksgiving; they will close early Friday as well, at 1pm ET.

Thanksgiving is a time for simple pleasures –gathering with loved ones to eat, drink, watch football, and be thankful.  Despite Thanksgiving’s rocky beginnings between the Pilgrims versus Native Americans at the time, it has evolved into a time-tested tradition where every American is encouraged to reflect on what they are most thankful for having.

Health, food, shelter, and the wellbeing of friends and family are often at the very top of our wish lists for giving thanks, but what about the less obvious but equally important things to give thanks for, like knowledge and education?

What does all this have to do with investing, you ask?

Here at NerdWallet, we think knowledge is power.  We work everyday to increase and improve the financial literacy resources available to you, so for Thanksgiving, let’s take a step back and bring it back to the basics. Here are the top 5 investing tips to be grateful you know about this Thanksgiving:

1. A Cornucopia of Choices: Always Diversify Your portfolio

On the whole, most people are best off to diversify their assets by placing them into a variety of mutual funds and then rebalancing on a regular basis.  If you don’t know where to start, read our introductory posts on investment management and the major asset classes for inspiration and a basic overview of best practices.

Don’t forget: even though diversification generally reduces your overall risk, never invest more money than you could bare to part with – you never know for sure when the market might take a turn for the worse.


2. Don’t Day Trade (But If You’re Going To Anyways, Be Careful)

Time and time again, financial experts advise everyday investors not to day trade.  Investment professionals aside, multiple studies have shown that day trading does not pan out well for people who aren’t expert enough to make smart choices.  But people are inherently still drawn to the markets, as if their money were burning a hole in their pockets.  If you are one of these people, read on for best investing practices to inform your stock decision-making. 


3.  Research Using an Unbiased Source

This may sound easy, but many financial services and brokerage websites, including Schwab and other large financial services firms, offer advice packaged in their unique offerings and recommendations that benefit their firm directly with fees and commission.

To help you select the best brokerage account for your unique needs and avoid paying unnecessary fees, we recommend using NerdWallet’s broker comparison tool to search and compare your options side by side.


4.  Have a reason: Look at the Fundamentals

When you have done your research and are narrowing in on a fund or stock you think has potential, make sure you have a well-articulated reason that you think it will be a smart investment, and write it down.  Keep tabs on this reason, and check back in every few months; if and when it goes away, and you don’t have another good reason to keep the stock, you will know it is time consider to selling it.


5.  Make a Commitment To Yourself On When to Buy and Sell

The stock market is highly volatile, and even if you think you’re picking something stable, you can never really know for sure.  To protect yourself, from day one you must know your limits: write down the price above which you’d want to sell (to collect the profits) and the price below which you’d need to sell (before you lose any more).  You can always reevaluate later, but these commitments to yourself serve to guide your decision-making when the ups and downs of the market may bring out unexpected emotions.

Knowledge is Power, So Use It Wisely

These are the basic precautions to take when investing; they may not come up at the dinner table, but if they do you’ll be prepared!  We are proud to offer the comparison tools to help you do your investing research, but at the end if the day, these tools exist so that you can figure out your goals and then make the markets work for you.

Knowledge is power, and for that we are grateful – so happy Thanksgiving, everyone.