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Investment 101

  • Risk and return – Before investing even one penny in the stock market, you need to understand that investments are never a sure thing. In the investing world, risk is the chance you take that the returns on a particular investment may vary. Through investing, some people have amassed fortunes and some have lost everything. One rule of thumb is not to invest any money you can’t afford to lose.
  • Knowledge – Doing research on possible investments is a good start. If you are interested in investing in stocks, learn more about the company. Mutual funds are a low maintenance, low cost way to start investing. Research different mutual funds to find one you like. Make contact with experienced investors and learn from them. Also check out the wealth of investing information free of charge online.
  • Begin early – An early start can make all the difference. Starting early will help you decide if investing is for you. The earlier your investments get to work, the more potential they have to grow over time.
  • Know yourself – Knowing your current life and financial situation will help you figure out exactly how much you can invest. What is your current net worth, monthly income and expenses? What are you financial goals? How much are you willing to risk?
  • Diversify – Once you become seasoned in the basics of investing, experts urge investors to diversify their investments. To diversify means spreading your risk across several different investments. Diversifying helps reduce your risk because, while one investment may be in a slump, other investments are likely to be holding steady or gaining.
  • Beginners luck – Although having early success can be great for a beginner, it perhaps is more of a detriment. Beginners who hit the ground running with their first investment will likely believe all investments thereafter are guarantees. With this mentality, beginners throw all their money and invest all they have, usually into one thing. While success is a possibility in investing, there still remains only one constant: nothing is guaranteed.
  • Long-term investing – When investing, one should have patience and discipline. Don’t be charmed by short-term fluctuations in the market, because all economies and businesses experience the boom/bust cycle.
  • Basic investment vehicles – Here are some investment methods available to the beginning and average investor:
    • Savings accounts
    • Certificates of deposit (CDs)
    • Money market funds
    • Bonds
    • Bond-based mutual funds
    • Index-based mutual funds
    • Stock-based mutual funds

 

Last modified: April 11, 2011 at 3:52 pm