Whenever the phrase "return to the basics" is used in reference to investing, it usually follows a broad and deep decline in stock prices -- a sustained bear market. However the prudent investor will often reflect upon the so-called basics as a matter of normal practice and routine.
The very definition of mutual fund strikes at the core of wise investment philosophy -- that there is strength in simplicity, diversity and frugality. Here are some basics to reflect upon as you consider where to invest in 2013:
- Invest for your personal economy: One of the largest mistakes you can make is to make investment decisions based upon the whims of market and economic conditions. The fiscal cliff will come and go within weeks; however your investment time horizon is likely several years or more.
- Stay diversified: Sufficient diversification can be accomplished with as little as one mutual fund but most investors will need a combination of 5 or more funds to build the best portfolio.
- Keep Buying: One of the most basic and powerful investing basics is dollar-cost averaging (DCA). 2013 is likely to bring more volatility or possibly the beginning of a new bear market. When you buy shares of mutual funds on a regular and consistent basis, and when stock prices are falling, you can help offset losses by purchasing more shares at lower prices. "Buy low and sell high" without the perils of market timing!
In summary, invest for your own objectives, turn down the media noise, and remember that life is not a tool for money; money is a tool for life...