Preparing financially for a secure future can be a massive head-ache. So, you’ve managed (eventually) to get rid of that darned credit card debt, your mortgage payments are well affordable (and so they should be, you’ve lived in the same darned house for more than 20 years) and you’re now in a position to dare to dream of a secure, financial future. You may have other financial goals in mind, it might be buying a new house, paying for college, paying for your retirement, so you’ve gotta’ start thinking about investing for whatever it is you want.
Investment tips are everywhere aren’t they, you’ll be offered investment tips from everybody including the dude behind the bar at the Red Lion (you can’t go wrong with #8 in the Breeders Cup, okay, so it’s a bit of an outsider which is why you’ll get such a good price), or from the fella’ who fills your gas tank on the way to work who has a “system” to beat the casino (but is still working at the gas station). Be afraid, be very afraid . . .
Deciding how and where to invest your hard earned money is a big decision you’re gonna’ have to make, and there’s plenty of stuff to think about. What’s your risk tolerance? Every investment offers some degree of risk, and generally, the higher the potential rewards the higher the risk (remember the Breeders Cup!) Before you invest any money you’ve gotta’ do some homework, I mean, there’s a lot to think about.
Investment Tips – What Do You Want To Invest In
- Mutual funds
- Buy an annuity
- Open an IRA
Before you decide to invest any money into anything, ask yourself these vital questions.
Investment Tip Questions
- Investment Tip #1 – define your goals. Why do you want to save the money? Do you wanna’ buy a new house, pay college fees, build up a little financial cushion for your old age?
- Investment Tip #2 – How long will it take to get your hands on your money again? You can usually sell stuff like stocks, bonds and shares almost immediately, but there are no guarantees that you’ll make a profit, there aren’t even any guarantees that you’ll get back all of the money you invested in the first place. Other types of investment like limited partnerships make it a rather more lengthy and difficult process to get your cash out.
- Investment Tip #3 – what sort of returns can you realistically expect for your money? Bond investments will generally offer a fixed return amount, but many other investments go up and down as the market changes. It’s worth remembering that just because an investment has made lots of money in the past, it ain’t no guarantee of its future performance.
- Investment Tip #4 – what sort of earnings should you expect? Are you talking rental income (from real estate investments), dividends, interest? What are your potential earnings over time? Real estate investments may earn you rental income plus has the potential for future growth, for example.
- Investment Tip #5 – what is the risk involved? All investments do carry an element of risk, but the important thing is to trade off between the risk involved and the potential rewards on offer. The higher the potential reward, the higher will be the risk involved. Bank savings accounts are insured by the federal government, other types of investment don’t have such protection.
- Investment Tip #6 – are your chosen investments diversified? Some investments will perform better than others given the right set of circumstances. Let’s look at an example – when interest rates rise – bond prices generally fall. Some industries can proper during “lean times”, and others will fail miserably. If you spread your investments around a little it really can help to reduce your risk.
- Investment Tip #7 – what tax advantages are attached to a particular type of investment? US Savings Bonds, for example, are exempt from both state and from local taxes, municipal bonds are sometimes exempt from state income tax, but are exempt from federal income tax . . . this sort of stuff can make a big difference to your investment pot at the end of the day.
Types of Investments
There are plenty of different types of investment opportunities to choose from, and remember, one really great investment tip is to diversify your portfolio by investing in several different types of investment. “Portfolio”, it’s the first time I’ve used that word in this piece and for very good reason, I bet you’re feeling like a pretty important investor now aren’t you, only serious investors have a “portfolio” which is nothing like a briefcase, in case you were wondering!
- Traditional IRA – personal savings plans with various levels of risk. Contributions are often tax deductible and you won’t be taxed on your earnings until you get ’em.
- Money Market Funds – low risk, mutual funds which are invested in short-term bonds. You would probably expect to get a better rate of interest than in a normal savings account.
- Bonds and Bond Funds – low risk, alternatively known as fixed income securities, the income on these is fixed once the bond is sold.
- Stocks – are definitely medium to high risk, you can make and lose a fortune all in one day (and plenty of people have). Stocks are simply a share in a company, and as the value of the company rises and falls, so does the stock value. It’s all about buying and selling at the right moment.