Ah, baseball – America’s great pastime! There’s nothing like it… or is there? As a matter of fact, the bat-and-ball game is pretty similar to the world of investing. As you daydream about ballpark hotdogs, grand slams and your team making it to the postseason, take your own seventh-inning stretch to think about your current financial goals. If one of them is building wealth, then investing should be a part of your plan.
You’ll need preparation, skill and the right mindset to get started. Once you step up to the plate, you may realize investing can be just as rewarding as winning a big game. Here are a few lessons straight from the big leagues to get you up to bat.
There’s plenty of excitement around spring training. With opening day around the corner, players from all teams are working hard to fine-tune their skills before the start of the season. Before you start investing, you’ll want to fine-tune a few skills yourself.
You may not be a major league stock trader or a finance expert, but that doesn’t mean you can’t acquire the skills needed to begin investing. Start by learning the language. Having a general understanding of investing terms can help you play the game.
Once you’re trained on the lingo, review your current financial picture. Understanding how much of your income can be invested should be your next play. There’s no magic number – it all depends on what’s best for you and your wallet. Even small amounts add up over time. And with the power of compounding, you can earn dividends on the money you invest.
Draft your team
Coaches, scouts and general managers are all involved in choosing players for their teams. This is a tall task considering each position requires different skillsets. For pitchers alone, the coaches need a variety of guys – pro teams have up to 13!
Variety should be top of mind as you build your portfolio. In investing, this is called diversification. It means choosing investments across asset classes – stocks, bonds or cash equivalents. Take it one step further and make sure you’re invested in variety of industries, too. A diverse portfolio can decrease risk and can increase the chances of your investments succeeding in varying market conditions.
Don’t swing at every pitch
A good batter knows his strengths – he can eyeball the pitches he can hit, and knows the ones he should stay away from. You too should keep an eye out for homers, balls and strikes as you start investing.
Even if your entrepreneur friend says his company’s stock will soar, be cautious diving into any one investment too quickly. Sometimes, it’s more important to get on base than it is to hit a home run. You can always meet with a financial advisor if you’re unsure. If you’re more of a DIY player, consider an index fund. This kind of portfolio is tied to the performance of a market index such as S&P 500 or Nasdaq, making it a great option to diversify your portfolio.
Play the long game
Professional baseball has one of the longer seasons in sports with 162 games in the regular schedule. Even the best teams will go through a slump from time to time. So it’s important for every coach and player to be patient and keep the end goal in sight.
Whether you’re investing to save for retirement, put your child through college or simply build wealth, you’ll need just as much patience as a heavy hitter in the bottom of the ninth. Avoid watching the market too closely and letting short-term results influence your actions.
Regardless of economic factors, investing generally allows for greater potential returns than most savings products. It’s a key play that will help you build your portfolio. If you’re strategic about your investments and make regular contributions to your accounts, you’ll be ready to knock it out of the park when the time comes.
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