Investing Tip:

Assess Yourself

The very first step that you need to take when you start investing is to assess yourself. It can have a profound effect on how well your investments will perform. Does that sound strange? Let's take an example.

Say you need some light bulbs and you go to the store where there are two packages. One is $3, with a $3 mail in rebate offer. If you mail in the rebate, your light bulbs only cost the price of a stamp. There is another package of light bulbs that is $2. Which one is the best deal? It all depends on whether you'll actually go to the trouble and hassle of mailing in the rebate. If you will the $3 package is cheaper. But if you know you won't, the $2 pack is actually the least expensive. Which package is less expensive depends on you being honest with yourself, not on the price marked on the package.

This is true in investing as well. If you're trying to do-it-yourself, but you can't take the time and effort required, then you may want to turn over your investing to a professional. Conversely, if you've hired a professional but are calling him/her every day with investment ideas, you might want to take it over yourself. If you're going to toss and turn at night and worry when a stock drops 5%, then stocks aren't for you. Or if you're sitting with long term savings in a bank CD and you're comfortable with some risk, than stocks or real estate may make sense.

Be honest with yourself. If you need help, get it. If you're paying for help and not using it, save yourself some money. If your investments keep you up nights, make some changes. By doing what works for *you*, you'll be a long way down the road toward successful investing.

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Donald Steinmann and Advanced Financial Management assume no responsibility for any actions taken due to comments made in The Investment Tip of The Week.