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IRA investing for beginners: First steps for nervous novices

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Consider your risk tolerance
Consider your risk tolerance | wavebreakmedia/Shutterstock.com

Consider your risk tolerance

Before plunging into investments, gaze deep into your soul and ask, "How will I feel when my account balance falls by 40 percent?"

Very generally, having more stocks than bonds means many exciting days of having no idea how much your account could be worth. But you shouldn't be checking your balance every day anyway.

A portfolio full of stocks, or stock mutual funds, is likely to go up over time faster than a portfolio filled with bonds. But in the short term, the value will move around much more.

Bonds are less volatile than stocks and generally have a fixed rate of return. But expect the return on bonds to be lower than that of stocks over time.

So the first rule of IRA investing for beginners is to toughen up and ignore the market gyrations. Even though there may be periods of extreme volatility, the trend over long time periods is up, up and away.

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