Six Simple Rules for Successful Investing

Forget about hot stock tips and head-spinning annual returns. Consider the simple strategies used by some of the most successful investors.

1. Invest early

The sooner you begin investing for your future, the greater the rewards may be. Start today to begin taking advantage of compound earnings.

2. Let it ride

Compounding can work wonders for a portfolio, as long as you avoid withdrawing dividends or capital gains from the investment accounts. Let retirement savings keep growing.

3. Be patient

The broad stock market can be volatile in the short run but historically has outpaced inflation and the return on bond investment options in the long run. It's tempting to chase the next hot investment option when returns are low, but highfliers usually crash sooner or later. Buying the latest trendy investment option your friend recommends or constantly trading or switching investment options in the hope of a better return can undermine your financial goals. Patience and persistence usually win out in the end.

4. Don't jump in and out of the market

Studies have shown that people who try to "time the market" usually fare worse than those who invest at regular intervals.

5. Reduce taxes

Successful investors keep their money working for them. That means taking full advantage of tax breaks for savers and investors.

An employer-sponsored retirement plan is one great place to start. Contributions invested in a retirement plan may reduce your current income tax bill. And those contributions, along with any investment gains, can grow tax-deferred until withdrawn in retirement, when you may be in a lower tax bracket.

A Roth IRA is another favorite of savvy investors. Although contributions to a Roth IRA do not reduce your current tax bill, they can grow tax-free in the account.

6. Diversify, diversify, diversify

Investing too heavily in one stock — even if it's your employer's — can be risky. A broad-based mix of investment options, tailored to your life stage, can help ensure long-term growth and smooth out short-term market fluctuations. Review your asset allocation regularly.

No investment strategy, such as diversification or asset allocation, can guarantee a profit or protect against loss in periods of declining value.

Withdrawals prior to age 59½ may be subject to income tax including a 10% tax penalty and redemption costs.

While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that The Principal is not rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.

Take the next step...

Get help in deciding where to invest retirement funds in the plan . Login to the account held for your benefit and Take the Investor Profile Quiz.