Investing 101: A Simple Approach To Investing

Photoxpress_1514355Instead of allowing your money to sit in a checking or savings account with little to no interest rate, you should consider some more lucrative alternatives. Sure, your money is almost guaranteed to be the safest while in a government-insured checking account, but you’re essentially leaving some passive forms of revenue on the table by doing so.

Before we go into methods of investing, you first must understand and follow the basic principles of saving. For starters, you have to save more money than what you’re spending. If you’re buying too many luxury items and unnecessary expenses, chances are you’re not going to have any extra money to save. Work on budgeting your finances first and then you can start thinking about how to invest your money.

When your debt is up to date and there’s money in your savings account, it’s time to start looking for smarter investing alternatives. Unless you have experience trading stocks or commodities, I recommend staying away from these sectors as there’s a potential to lose all of your investment. Remember the golden rule of investing, though – greater risk means the potential for higher profits.

One of the safest types of investment is a government bond. These are bonds issued and backed by the federal government which promise the holder a specified amount of money and interest when cashed in on a certain date. Typically, the individual holds on to to a government bond for a given period of time (5, 10, 30+ years) before they’re able to cash it in.

If you’re willing to try an investment alternative with a slightly higher risk, you should consider placing your money into a mutual fund. Basically, these are stock purchases which are made and managed by reputable financial investors. The primary advantage of a mutual fund is the fact that your money is spread across a variety of stocks, which reduces your overall risk. When choosing a mutual fund to invest in, look at its history to see how it performed in the past. Obviously, you want to invest your money in one with a positive return and not many high or low spikes.

No matter what route you decide to take with your investment, you have to treat it as a long-term financial solution. It’s all too common for individuals to pull their money out of bonds, stocks, mutual funds or some other form of investment at the first sign of trouble. Keep an eye on your investments and watch for signs new trend shifts and patterns.

When in doubt, speak with a financial adviser to see what investment options he or she recommends. Bonds and mutual funds are two of the safest forms of investment which can still provide a nice return on your initial investment. However, there is big money to be made in trading stocks and commodities if you’re willing to do the leg work and take the risk. Only an experienced financial adviser can tell you what the risk option is for investing your money.

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