Start Small and Watch Your Investment Grow
For those people who think they will make a fortune investing in the stock market, I have news for you, you will be quite disappointed or broke with that attitude. Maybe less than 1% of the people reading this may become independently wealthy trading securities, but the rest of us will have to settle for decent returns on our investments. Now, I don't want to scare off those people looking to better their lives by expanding their knowledge concerning investing, I just want to be honest with everyone. Most billionaire didn't make their money from the market, they were entrepreneur, owning and creating income from hard work and ideas. The market has just facilitated in helping them make more money. That is exactly what we want to look at, how everyone can make more money out of what they have now, and in the future.
This section will cover most all levels of investing except the super aggressive, high rolling, quick money seeking trader (those are the type that wouldn't seek help anyway because they "know it all"). The simple idea of trying to invest at a rate that will give us a return that beats the rate of inflation, or better, is where we want to begin. Go look at the graphic on the Home Page: Time Value of Money
The first economic word we should discuss is diversification. Simply stated, "Don't put all your eggs in one basket." A good variety of investments gives a person's portfolio the protection it needs when unforeseen events create a few bumps in the financial road. The following is a quick guide for starting small, diversifying, and watching your money grow:
1) Set-up a way to have money taken out of your paycheck, pretax (tax deferred), and placed it in an investment program.
2) Money you don't need for a period of time, look to put it into a certificate of deposit.
3) Look into annuities through your insurance company. They generally offer a guaranteed minimum rate of return.
Most every type of the above mentioned investment is covered by the Federal Government under the FDIC or some similar insurance protection plan. No risks!
4) For investors afraid to step out into the world of trading securities, or for seasoned veterans looking for a steady, fairly safe return, look into mutual funds and index funds. "We have now crossed over into that brokerage, twilight zone." There are many different type of mutual funds and index funds, some a little more risky than others, but if you get one through a good, solid company, the risks are low. A mutual fund is basically someone managing your money to buy a combination of stocks and bonds (I know for you market nerds, that is a simplistic description). Since a mutual fund has bonds (bonds have a low risk compared to stocks), they are a more secure investment than just stocks. One drawback of a mutual fund is that you have no say in what is purchased, so you are placing your trust with that company. An index fund is a group of stocks that fall into a category that unites them as one. The S&P 500 index fund means you are not buying one stock but the whole group. Technology stocks could be grouped as one investment. The advantage of an index fund is that if one company goes down, your investment may still go up depending on the other companies in your index. I would suggest when shopping for these, find one with NO FEES. I hate fees.
5) Stocks. I hear the brakes slamming already. The media and the stock market itself have created such a mistrust in the public's eye, that I am sure some have already decided not to enter this mysterious world of magical numbers. That is unfortunate, because the best return on your money awaits you in this land of Oz. Knowing just a few rules will help you better navigate these seemingly treacherous waters.
a) Find companies you have known for years, and actually use their product.
b) Look them up on a site. I like Marketwatch.com or Yahoo business.
c) For beginners, I would recommend stocks that have these elements:
*Dividend
*5-year upward trend in stock price
*A P/E (price/earnings) ratio under 20
* A stock you know
6) Don't watch your stocks on a daily basis. I can't promise your stocks will go up today. I can't promise your stocks will go up tomorrow. But I can tell you, that if you invested in a solid company following the above rules, you will make more than your bank account over an extended period of time.
7) Start small until you feel comfortable in this new environment. Then allow your wings to open, and fly your way to a more successful financial future.
This section will cover most all levels of investing except the super aggressive, high rolling, quick money seeking trader (those are the type that wouldn't seek help anyway because they "know it all"). The simple idea of trying to invest at a rate that will give us a return that beats the rate of inflation, or better, is where we want to begin. Go look at the graphic on the Home Page: Time Value of Money
The first economic word we should discuss is diversification. Simply stated, "Don't put all your eggs in one basket." A good variety of investments gives a person's portfolio the protection it needs when unforeseen events create a few bumps in the financial road. The following is a quick guide for starting small, diversifying, and watching your money grow:
1) Set-up a way to have money taken out of your paycheck, pretax (tax deferred), and placed it in an investment program.
2) Money you don't need for a period of time, look to put it into a certificate of deposit.
3) Look into annuities through your insurance company. They generally offer a guaranteed minimum rate of return.
Most every type of the above mentioned investment is covered by the Federal Government under the FDIC or some similar insurance protection plan. No risks!
4) For investors afraid to step out into the world of trading securities, or for seasoned veterans looking for a steady, fairly safe return, look into mutual funds and index funds. "We have now crossed over into that brokerage, twilight zone." There are many different type of mutual funds and index funds, some a little more risky than others, but if you get one through a good, solid company, the risks are low. A mutual fund is basically someone managing your money to buy a combination of stocks and bonds (I know for you market nerds, that is a simplistic description). Since a mutual fund has bonds (bonds have a low risk compared to stocks), they are a more secure investment than just stocks. One drawback of a mutual fund is that you have no say in what is purchased, so you are placing your trust with that company. An index fund is a group of stocks that fall into a category that unites them as one. The S&P 500 index fund means you are not buying one stock but the whole group. Technology stocks could be grouped as one investment. The advantage of an index fund is that if one company goes down, your investment may still go up depending on the other companies in your index. I would suggest when shopping for these, find one with NO FEES. I hate fees.
5) Stocks. I hear the brakes slamming already. The media and the stock market itself have created such a mistrust in the public's eye, that I am sure some have already decided not to enter this mysterious world of magical numbers. That is unfortunate, because the best return on your money awaits you in this land of Oz. Knowing just a few rules will help you better navigate these seemingly treacherous waters.
a) Find companies you have known for years, and actually use their product.
b) Look them up on a site. I like Marketwatch.com or Yahoo business.
c) For beginners, I would recommend stocks that have these elements:
*Dividend
*5-year upward trend in stock price
*A P/E (price/earnings) ratio under 20
* A stock you know
6) Don't watch your stocks on a daily basis. I can't promise your stocks will go up today. I can't promise your stocks will go up tomorrow. But I can tell you, that if you invested in a solid company following the above rules, you will make more than your bank account over an extended period of time.
7) Start small until you feel comfortable in this new environment. Then allow your wings to open, and fly your way to a more successful financial future.
