Before you bet the farm and invest money in some investment scheme or stock you don't understand, learn investment basics and learn investing strategy. Investing money is not rocket science. Here's a basic money guide to help you start investing as an informed investor.
First learn investment basics. There are a vast number of investment options out there, but each can be simplified and evaluated to determine whether or not it fits your particular needs. To make sense of it all you need to first get a firm grasp of the following investment characteristics: liquidity, safety, growth, income, and tax advantages. Every investment can be evaluated by ranking it in terms of these characteristics.
Get a handle on stocks and bonds. These are two of the major investment options everyone needs to understand when investing money. Stock investing is geared to folks who want growth with liquidity. Bond investing features relative safety and high income. Notice that we just referred to the terms in step 1 to characterize these investment options.
Get up to speed on safe, liquid investments like money market securities and bank money market accounts. Every investment portfolio should include liquid safe assets as well as stocks and bonds.
Dig into the concept of alternative investments like gold, real estate, oil & gas and other commodities and tangibles. Foreign securities are included as alternative investments as well. These investment options can produce growth for investors when the stock market turns sour.
Now concentrate on learning mutual funds. This should be easy enough since you now understand the types of investments these funds invest money in. Mutual funds manage your money for you, but you need to pick the appropriate fund. Your basic choices are: stock funds, bond funds, money market funds, and balanced funds that invest in a combination of all of the above.
The final step is to learn investing strategy so you can manage and maintain a balanced investment portfolio ... at a level of risk you can live with. You will need to master investing tools and concepts like asset allocation, balance and rebalance, and dollar cost averaging.
If you follow the above steps, in order, the game of investing money will come together for you. Otherwise, you're likely to remain lost and confused like most folks. You can not start on page 47 of a novel and expect to understand the plot, can you?
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