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Home Investing Basics
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Written by Administrator   
Tuesday, 24 March 2009 03:23

So.... what's the best way to invest money?

Figuring out the best way to invest money can be a difficult process, especially if you are just getting started. There are many different ways to invest money, all with varying degrees of risk and potential profit. Here I will go over investing basics to give you some ideas on the different types of investments that are out there.

1. Savings And Money Market Accounts

Q: Who are savings accounts right for?

A: Those who are seeking a safe, risk free way of earning a guaranteed rate of return. If you are a senior or perhaps a single parent with one income and cannot afford the risk of losing any money, this might be the best option for you.

 2. Bonds

Q: Who are Bonds right for?

A: Outside of savings accounts, bonds are considered some of the safest investments around. However they are not completely without risks, especially in the case of bonds of lower credit quality. Bonds are for investors who seek a higher yield than what a savings account can offer, and are willing to take on just a bit of risk for the higher yield.

3. Mutual Funds

Q: Who are Mutual Funds right for?

A: Those who want to the possibility of bigger returns that the stock market offers, but without the higher risk of buying individual stocks. Although mutual funds are typically well diversified, they are often sector based which can lead to losses when they are out of favor. While mutual funds do pose the risk of possible losses, they are typically not as great as individual stocks.

4. Individual Stocks

Q: Who are Individual Stocks right for?

A: Those who are looking for the best possible return on their investment tend to buy individual stocks. Risk levels very, from moderate to high depending on the company, the stock and other factors. While the financial rewards and profits can be great, only people who can accept the possibility of significant losses should consider individual stocks. If you are interested in buying individual stocks, the best way to reduce your risk of large losses as much as possible is to be diversified!

Now, to address one additional concern that seems to come up a lot in regard to investing:

"I don't have lots of money to invest - can I still get started?"

Absolutely! I think one of the biggest myths about investing is that it's only for the rich. Not so. Bonds can be purchased for as little as $25, and if you want to try stock investing there are a couple of brokers that let you open an account with no minimum. For more on this, when you are ready to open an account please see the Open An Account section on the menu to your left, where I discuss these brokers.

Hopefully this information was helpful and it gives you a general idea of what type of investing you want to start with. And if so, congratulations, you are now one step closer to being an official investor! Next, you can figure out what type of investor your are here.

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Last Updated on Sunday, 29 March 2009 15:21