8 Tips For Investing Money to Build Wealth

In order to build wealth, you have to make your money work for you. In other words, you need to make proper investments and earn a good return.

This is not as difficult as it seems. With all the negative press going on concerning the stock market right now, you might feel it is better to keep your money under a mattress rather than investing it. However, this is simply not true.

The stock market has provided a 10-15% rate of return over the last 80 years. Of course, this is no guarantee that it will do the same during your investment horizon. Past performance is not necessarily an indicator of the future. However, what else do we have to go on?

In order to make money with our investments, we should follow some simple tips.

I should tell you right now that I am not an investment professional of any kind. I do not profess any expertise whatsoever with investing. I am just passing along what I think is some sound advice. Invest at your own risk!

Practical tips for investing from a layman

I believe in keeping my investment strategy simple. I'll admit that seeing my net worth grow is very exciting to me, but the nuts and bolts of investing is not. If you are an investment geek, then you probably won't find much to get excited about below. However, if you are like me, you need simple, practical information to help you grow wealth for retirement. Here's what I've learned:

1. Pay off your debts before investing

I've already told you why I believe being debt-free is the path to financial success. You should pour all your financial might into becoming debt-free as soon as possible. Freedom from debt is the most important step toward building net worth. Remember, your net worth equals your assets minus your liabilities. Therefore, it makes sense to eliminate your debt before you start investing your money anywhere else.

Make Money Investing Money Conservatively

The sensible way to make money by investing money is to use a moderate to conservative investment strategy. Why did millions of Americans lose a large part of their life savings in 2008? They had an overly aggressive investment strategy. They had a large portion of their investment assets at risk in the stock market and many of them didn't even know it.

I don't care how old you are; keeping 80%, 90% or more of your investment assets in the U.S. stock market is too aggressive and too risky. Plus, it diminishes your flexibility and ability to take advantage of investment opportunities.

By early March of 2009, stocks had lost half their value in a little over a year. Had you been heavily invested in equities (stocks) throughout this period, what investment options did you have in the first half of 2009? You had two investment options, and both were negative.

First, you could sell stocks at a loss. Second, you could hold on and hope that the stock market came roaring back. Either way, you were in a losing position.

The stock market came back with a vengeance, up 50% in six months. Those who sold earlier and took big losses were not happy investors. Others who held on were still behind. If you had $10,000 in stocks and lost half you were left with $5000. Then when you gained 50%, you were only up to $7500.