The Magic Of Investments: Tips And Tricks of Investing
The Magic of Investments
I envy people who actually understand all the ins and outs of investing and who have no fear when it comes to their investments.
Obviously, for these folks, it's a science and a "business" that they've studied and learned about to the point where they feel secure about what they invest in and when.
For the rest of us, who pretty much blindly invest with companies like Edward Jones and hope and pray for a positive outcome (and income I might add), it can be a little scarier because we truly don't know what we're doing.
Especially the older people get, the more they look to their retirement and wonder if anything that they've invested in will actually pay off!
Then you take a thing like the recession and an economy that the bottom has dropped out of and you definitely think investing is not for the fainthearted.
So what's the common person who knows little to nothing about investing to do?
Well, there are some tips and things to think about but realize that no matter what type of investment you put your money into, it's a risk.
Some are more calculated than others. Some forms of investing are super high risk and could end like many people's sad stories in the past few years where they lost everything....but then again, if you're a slow and steady plodder, you may turn out of this mess okay because you hung in and your investments were less risky.
PLANNING YOUR FUTURE IS ESSENTIAL
Knowing your game plan.....how long before you want to use your investment money...is key to any good plan of investment. Are you going to be investing for a short period of time? For instance, do you want to retire in 5 years or are you young enough that you can invest for a longer period of time?
Traditionally when you have a longer period of investment to look forward to, no matter what the market does and no matter what the downtrend is, your investment capital is going to recover because it's only a matter of time before the market turns back upward.
If, however, you're on the shorter term investment plan, meaning you plan on retiring in a few years, you may have a bit of trouble getting that money back right away if you've invested in riskier types of investment like stocks.
Long term investing is able to withstand the so-called periods of bad returns. Short term investors are not afforded that luxury because time is in this case money.
For instance, if you want to use the money from your investments within the next 5 years or so, avoid individual stock purchases or mutual funds that are stock-based.
Still further, if you want the money in the next 3 years, don't invest in the above at all, and add bond mutual funds to the list. Also stay away from real estate investment trusts which will drop if interest rates increase.
Don't feel that there are any options left if you're on the short term plan?
Not so! You can purchase
individual bonds or CD's that have a life of less than 3 years, you can put
your money into a savings account, or you can put it into a money market
fund. You can also invest in securities such as TIPS, which are treasury inflation protected securities, though you should hold those for at least 5 years to get the most bang for your buck.
The reasoning here is....the shorter time period in which you need your money, the less risk you want to take.....or should take!
People with retirement way off in the distance can afford the luxury of taking risks and waiting for higher returns that probably will come eventually!
Investing is a tricky business and not always understandable. Many people freak out when the market starts to tank and immediately close their accounts and pull their money out.
That's the worst thing that they can possibly do because frankly, they've already lost money but they lose even more when they pull the money back out and walk away with penalties, etc.
They also stand to lose much more over the long term and had they let the money sit, it eventually would have recovered.
Investment Tips and Strategies
While playing the lottery won't cost MOST people a lot of money, it's not
an investment strategy. Don't bank on
winning it to realize your financial dreams. (Although spending some every week or month on it isn't going to upset the apple cart and who knows?)
If you do nothing, you stand to gain nothing at all. Investing in something is better than investing in nothing. Just evaluate according to long term or short term investing strategies and don't take chances with your money.
The stock market is probably for the young (unless you really know what you're doing). It seems to be way too unstable and frightening for people that are older or people who are new to the dance.
There is no shame in investing in bonds and CD's when you need to realize your returns in a matter of a few years.
Investing late in life is better than never investing at all. You never know until you try it and playing it safe can net you returns!
If your employer has a 401(k) plan, make SURE you're invested in it. It's like getting money for free and you
don't want to turn that down! If there is a plan in place and your employer matches it dollar for dollar, you have yourself a little nest egg.
Remember too that inflation can be a huge threat to long term investments while rising interest rates are bad for bonds.
Do your best managing your investments and unless you're a daredevil, don't take chances with your money. But don't panic because the trend is going down. Chances are, it'll bounce back up and things will even out.
Don't be afraid to speak with investment brokers and counselors but keep in mind that their advice is biased based upon their desire to get you to invest more and in the way that is profitable for them!
Look at different options and see if your portfolio for investments meets this criteria which is recommended for most middle-class Americans....90% safe investments and 10% risky investments. If you're older or nearer to retirement, those numbers should be the same if not all invested in safer investments such as CDs and bonds.
As in all things, make up your own mind and decide if a little risk is worth taking or if you just want to play your investments safe. After all, it is YOUR money!
There are many people giving advice out there but I know myself and I know that I tend to be conservative in all things. I prefer to plod along with the end in sight but on the other hand, some people do really, really well with taking more risks.
Again, it's up to each individual investor how much to put out and how much to gamble with. If you have any input to this tough subject though, please leave comments for us all to learn from....no specific stock tips but just overall opinions on how to invest!
Dave Ramsey on Retirement Investment
More Reading and More Investment Advice
- Excellent Investment Advice
First, let me tell what this website is not. It is not designed to be used as a guide for stock or bond trades. Secondly, it is not a step-by-step model for investing. Nor is it designed to tell you what type...
- Best investing advice by Warren Buffett
8 BEST INVESTING ADVICE BY THE 2008 WORLDS RICHEST PERSON The 2008 worlds richest person, Warren Buffett, the oracle of Omaha achieved this feet not by luck but by adhering to simple but critical...
- Investment advice for the young
If I'd only known then what I know now. If I could do it over again. if... if... if.... If you are young and reading this hub I want to prevent you from saying this 30 to 40 years from now as it relates to...
- Stock Investment Advice
Most of us depend on external sources for stock investment advice but we are not sure if it works or not. We hope for the best leaving the decisions about our investments to others and we think that it is...
- Maximize your Wealth: Investment Advice for Canadian...
Your choice of investments can lead to a prosperous future or a disastrous one. Sure, the amount of earnings you allocate to mutual funds or stocks makes a big impact. Its a fact however that the...
- Investment Advice
This is the first in the Investment Advice: Retirement Investing For Everyone series. To the point, easy retirement investment advice than anyone can follow.
- How to invest and get better returns without getting...
Interest rates are beginning to creep up from historic lows and will most likely continue to rise. CD rates are below 2 percent. Treasuries are not paying that well right now at all. Long...
- How to invest in ETFs
How to invest in Electronically Traded Funds (ETFs): With CD and money markets paying so little interest most investors are considering high yielding investments like dividend paying stocks or high yielding...
- How to Invest as a College Student
An easy way for college students (or anyone else strapped for cash) to invest and see long-term returns with little risk.
- How to Invest Money Wisely
How to invest money wisely is the age old question. The world of investing can be a difficult one to master, and requires some serious knowledge of the game if you are looking to make any form of serious...
- How to Invest Wisely into Bank CDs
Before providing info on how to invest into CDs, maybe some quick explanations of a CD would be helpful. Bank CDs (certificates of deposit) are basically a loan you are making to the bank. Sounds a little...
- How to Invest $100 and Make Money
There is all kinds of information on the Internet about how to invest. Much of it is inspiring to read, but holds very little usable information for those of us who have less than 1,000.00 to invest. I...
- Learn How to Invest with Stock Simulators
If you know what you are doing, investing your money in the stock market will give you a better return than keeping it in a savings account. But, the key to success is knowing what you are doing. When I was...
- How to invest during a recession
The key to investing during a recession is therefore to start off with the right mentality. Do not panic. Yes recessions can be scary, but they also lay the groundwork for opportunities in the future.
More by this Author
Budgeting tips for low income families. All families could benefit from these money saving tips.
Let's explore the difference between being frugal and being cheap. Which is better, cheap or frugal? And is there really a difference?
- EDITOR'S CHOICE38
How to get your pet de-skunked, pronto. Foolproof ways to get the odor out after your dog or other pet has been sprayed by a skunk.