How to Invest Wisely

The reason you should invest in the markets is for the rate of return. As long as you invest in a product that has a fixed rate of return, that is the exact rate of return you will always get. With mutual funds and stocks, the rate of return is variable, resulting in the chance for a better return. But how not to loose my shirt? Good question. First lets understand that investing equals risk. To not be so easily effected by risk, you must diversify. You need to spread your investments over different types (ie. stocks, bonds, ETF's, mutual funds, etc) and across different sectors like, banking, commodities, blue chips, etc. This will help to ensure that if one sector or type of instrument does badly, another should help to pick up the slack. Mutual funds and ETF's (electronically traded funds, like a mutual fund but trades like a stock) have this feature built in. Next, dollar cost average. Put in a set amount every month. This way if the price goes down, you buy more and if it goes up you buy less. If you've done your home work on the company or fund, then chances are it will remain a good investment for a little while at least. This means that your cost basis could end up less than if you just dumped in a bunch of money at one time.

Balance, balance, balance! Never, ever, just put money in something and turn a blind eye to it. Review your investments at a minimum every six months. This will ensure that you can spot a laggard early, or at least be kept abreast of events. If a company is doing well, keep them. If not, consider if it's just a slump or if it's in trouble. Read news about it. You may want to allocate a specific percentage of your portfolio to each stock/fund and sell off the excess of the ones that are doing well and buy more of the ones that are not. Keep doing this once a year or so, and it will help ensure that you are not over weighted in one area or another, and if the laggards go up in value, you win.

Lastly, be patient. This is a long term thing, don't expect to get rich quick, and never invest more than you can afford to loose. You want to invest extra money, not next months rent. That's called gambling, and they have hot lines for that.

Ofcourse, risk and return go hand in hand, and if you are a particularly daring type, you could go the Forex route. Foreign Exchange is a volitile market and if you don't know what you are doing you can just as easily loose as win. There are many training programs out there and just as many platforms. This one seems to be pretty good, but remember, this is risky.