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Strategies on Investing Your Savings

Updated on November 15, 2011

Safe and Risky Investments

Some investments high risk while others are comparatively safe. What should the strategy be if you are thinking of investing your savings?

First you should establish the reasonable amount of money you will need for emergencies. This may range anywhere from $1,000 to $5,000, depending upon the needs of your family or your self as a single. These funds should be set aside in an insured savings account. Beyond that, your initial investment scheme is to pay off any con­sumer debt, such as car loans. When that has been carried out, you can then formulate an invest­ment plan.

The most common investment scheme is to maximize your profit while minimizing your risks. If your assets are placed in cash accounts, such as stocks, bonds, mutual funds, certificates of deposit or treasury bills, the risk is minimized, but so is the income. In an inflationary economy, these types of assets will lose value. Assets placed in speculative investments such as gold or silver, may give maximized profits, but, are also high- risk.

A good investment strategy is to bal­ance the risks and returns. It is wise to diversify your invest­ments. If you should take on risks, choose the ones that are reasonable for your age, income bracket, and the goals that you're planning to reach.

Are money markets safe?

A money market fund is an interest-bearing account in which several individuals pool their money, which is then handled by a professional investment firm. Money market accounts ranks among the highest-earning interest accounts around and your money is still avail­able "on demand." This type of investment may or may not be insured.

So, basically, a money market account is a risky investment, not a secured savings account. The value of your shares in the money market is dependent on the total value of the investments owned by the account at any time. If you have invested in an unsecure account and you are afraid of the risk of losing your funds, then it is suggested that you move it to an insured account.

Generally, the major brokerage firms that offer insured accounts offer government funds as well, meaning that your money is supported by government securities. You need to be very careful as some of these funds do not really own the government securities. They buy "repurchase agreements," meaning that the existent government securities are owned by another institution or company that has pledged them as collateral. Thus, you're actually loaning the money to that institution and not to the government. It would be best to consult investment advisor or broker such as Betterment.com on the specifics of financial investing.

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