5 key tips for self-directed investors

No. 1: Develop a systematic plan
No. 1: Develop a systematic plan © Ryan R Fox/

"Successful investing begins with a time-tested and well-researched investment process that must be followed religiously," says Paul Schatz, president of Heritage Capital, a Woodbridge, Conn.-based investment management firm.

Too many do-it-yourself investors switch from one investment to another without a set strategy. This can result in dwindling assets.

"Investing can't be done by the seat of your pants," Schatz says. "Markets don't act rationally all the time. If you don't have a plan to navigate the downturns, emotions take over and you make wrong decisions at the wrong time."

Consistently investing a regular amount each month -- $1,000, for example -- in good times or bad, leads to savings that compound over time, Schatz says. Because they're already diversified, investing in mutual funds and exchange-traded funds, or ETFs, minimizes risk compared with choosing individual stocks, which often fluctuate wildly in price.

Further diversifying among funds that represent different asset classes is critical to well-rounded investing and an important way to lessen risk. For instance, you might have a mix of large-cap and small-cap funds with growth and value styles, domestic and international funds, as well as bond funds.


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