Story source: Robert Weagley, Ph.D., Associate Professor and Chair Emeritus, Personal Financial Planning, University of Missouri; Written by: Debbie Johnson, Communications Associate, University of Missouri Cooperative Media Group
Every family has its own unique financial goals. Those goals could be saving for retirement, putting money aside for a college education or buying a house. Whatever your goals, you should seriously consider investing, says Robert Weagley, associate professor of Personal Financial Planning at University of Missouri.
Three things can help you become a successful investor: discipline, diversification and time, says Weagley.
Discipline means forgoing short-term gratification for long-term saving. In other words, rather than spending, you set aside that unspent money.
“Savings, to me, is what you do by not consuming your money,” Weagley said. “Then, once you’ve saved money, it’s time to start thinking about making some investments.”
Investing is not without risk, but with risk comes reward. Diversification — having your money spread across different types of investments within your portfolio — is the best way to offset risk. Investing in just one company means you could lose a lot if anything goes wrong.
“Think of it like a horse race,” described Weagley. “We know one horse will win and one will lose. If we could bet money on every horse in the race — diversification — the horses will take turns winning, and over time we’ll get solid returns.”
This, of course, brings us to the importance of time. The longer you invest, the better you can balance risk versus return.
“It’s very important for young people to start saving their money when they’re in their 20s,” Weagley said. “If they wait until their 30s or 40s to start, it will be very difficult for them to reach the financial goals they set for themselves.”
Weagley said removing emotions from investment decisions is also important. By controlling emotional response to temporary changes in the market, either up or down, you’ll be able to achieve higher rates of return over time and reach financial goals.
For more in-depth information on this topic, listen to a podcast of this interview with Dr. Weagley.
For additional information and resources, see the MU Office for Financial Success Investing 101 page.