1. Start early. By saving $1,000 a year at age 25, you could end up with five times what you’d have if you started at age 45.
2. Use your 401(k). You put in pretax dollars so it’s a great savings plan. Passing up employer contributions is giving up free money.
3. Keep it simple. Choosing three or four index funds and a small-cap stock fund will give you broad exposure.
4. Don’t try to beat the market. Even the best fund managers have trouble beating the S&P 500.
5. Don’t chase trends. If you hear about a “hot” stock, investigate it. Go to investopedia.com.
6. Make saving automatic. If you are maxing out your 401(k), get payroll deductions transferred to a Roth IRA or a high-interest savings account.
7. Go heavy on stocks. The simplest formula: subtract your age from 120. That’s the percentage you should have in stocks, the rest should be in bonds.
8. Hold down fees. Be wary of any mutual fund charging a management fee higher than 1 percent. Or stick with an index fund.
9. Get rid of credit card debt. Rank them by their interest rate and pay off those with the highest rates first. For low-interest student loans, consider making minimum payments and investing in your 401(k) instead.
10. Defer taxes. In a taxable account, you’ll pay 15 percent in capital gains taxes every time you sell a winner you’ve owned for more than a year. At tax time, sell losers to take advantage of the annual $3,000 capital loss deduction.
