Execute and periodically examine the plan

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LFG - Execute and periodically examine the plan

Stick with the plan

Once you've devised a plan, stick with it. By making regular contributions, you'll not only keep your nest egg growing, but you'll be utilizing an investment technique called dollar-cost averaging. This involves putting a fixed amount of money into an investment on a regular schedule, regardless of market price.

For example, you invest $100 in ABC Company each month. If the share price is down, you'll be able to buy more shares; and if the price is up, you'll buy fewer shares. Over time, your share prices should "average out," since you'll purchase some shares at a higher price and others at a lower price. While dollar-cost averaging doesn't guarantee a profit or protect you from loss, it does free you from the burden of always trying to hit the market at the "right time."

Don't chase yields

And don't play the "market timing" game. Although it's important to be flexible, experts caution against jumping into and out of investments in the hopes of "making a killing." Even experienced investment managers acknowledge that market timing is difficult at best, disastrous at worst.

Stay informed

If you're a new investor, it pays to gather as much information as you can. Read up on investing and money management techniques.

Make a periodic review

Even if you're an experienced investor, it's important to review, and possibly adjust, your plan periodically to make sure it's still appropriate. You'll want to review three areas:

Life changes such as employment, housing or health.
Your financial and tax situation.
Your objectives and portfolio allocation.

Just like a car, you need to keep your plan in tune to keep it performing at its best.

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