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How to Invest Like the Wealthy

By U.S. News & World Report

Investors are often thinking about how they can generate more wealth, but many make critical mistakes that impact their returns. At the same time, investors who have already made it big seemingly continue to rake in the money — but of course, this isn’t a coincidence. Either through hard work or knowing where to get the right financial advice, the wealthy are successful at growing assets.

This year’s U.S. Trust survey on wealthy individuals found that a third of respondents accumulated their wealth through investments. But which investment vehicles to utilize is another story. Here are some tips on how to invest like the wealthy.

[See: 10 Ways You Can Invest Like Warren Buffett.]

Diversify your portfolio. Wealthy investors tend to realize that betting on single stocks like Apple (ticker: AAPL) or Tesla Motors (TSLA) with the hopes of catching a windfall is usually not a risk worth taking. In fact, a recent study by Openfolio found that the top 5 percent of investors in terms of wealth had the lowest portfolio volatility of all participants, and they had less than 40 percent of their portfolios invested in single stocks. Instead of stock picking, focus on lowering volatility and diversifying your portfolio, which will help limit downside risk during market shocks. If you already have a properly diversified portfolio, stay the course and resist any temptation to time the market. Doing so successfully is difficult for even the most experienced professionals, who typically have access to a wider information base than the average investor.

Focus on the long-term. Market events like Brexit and the presidential election have given investors the jitters, and many individuals are selling off stocks or making other major adjustments to their portfolios. It is critical for investors to stay the course during these types of market events. Historically investors have been rewarded for their patience, while those who panic don’t benefit from ensuing rallies and may face transaction fees and negative tax consequences. The U.S Trust survey found only 14 percent of wealthy investors made their biggest investment gains by timing the market. Eighty-six percent were more successful through long-term buy and hold strategies. Making sudden decisions can have a very negative impact on investors’ long-term financial goals, including the accumulation of an adequate retirement nest egg.

[See: 10 Tips for Couples and Young Families to Build Wealth.]

Avoid variable annuities. Variable annuities are largely considered poor investments — except by the advisors who rake in hefty commissions by selling them. It is generally recommended to stay away from variable annuities given that they are typically associated with high fees, limited investment options and a lack of liquidity. Consider other investments that provide lower fees and higher returns. If you do choose to fund a variable annuity, ensure you are working with a financial advisor who will communicate with you transparently and regularly. Even with the Department of Labor’s fiduciary rule going into effect next year, it is important for all investors to ask their financial advisors about fee structures.

Be wary of target-date funds. While target-date funds can seem like a convenient way to appropriately allocate your portfolio, they don’t always align with your risk tolerance, investment goals or the other assets you own. If you are researching target-date funds, be sure to look at their investment strategies, fees and expenses, and how they would fit within your overall asset allocation.

Understand the risk of alternatives. In addition, many investors who are seeking higher returns are considering alternatives such as illiquid real estate investment trusts, hedge funds or private equity. It is critical to first discuss factors like your earnings capacity, risk capacity and propensity, age and investment goals with an advisor to consider if these riskier investments are appropriate now or even in the long term. If you and your advisor decide you have the ability to invest in alternatives, remember that as a general rule, high-risk alternatives should only comprise between 5 percent and 15 percent of a portfolio.

[See: 11 Great Investing Tips for Women.]

Regardless of what you’re looking to invest in, from a large cap manager to a liquid REIT to an ETF, research the pros and cons to determine whether it fits with the level of risk you are comfortable with as well as your long-term investment goals. Doing so will help you ensure that you’re investing your money safely and intelligently, and will ultimately produce an increased likelihood of better returns.

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How to Invest Like the Wealthy originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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