Choosing the right type of investment doesn't have to be difficult or confusing. If you are like some people, you may find the world of investing complex and hard to understand. You know you want to invest your money but you don't feel you have the knowledge to choose the right kind of investment. All of this can lead to you being stuck with an investment you didn't really want or that doesn't perform the way you expected.
All investments have risk and that there are many various types of risk. It is advisable to decide prior to investing, what level of risk you are comfortable entertaining. Then decide on investments that will keep you away from these types of risks. Some think that a CD invested at a bank is guaranteed by the government. It is free from the bank defaulting, however it is not free of interest rate risk or the risk of rising prices. You may need to keep your money stable so that it can provide you the income you need to live. However, prices for medications, food, and fuel continue to rise so you might need some way to protect the purchasing power of your income from inflationary issues.
It very important to diversify your investments. You have heard the saying..."Don't keep your eggs all in one basket". That is so true. Take for instance the Bernie Madoff Ponzi scam. I heard Donald Trump being interviewed the day after the news broke. He was telling the reporter how he had been hosting a party in Palm Beach the night the news came down about the Ponzi scam. He personally knew of individuals who attended that party that, not only had invested all of their money in the scam, but had leveraged their homes as well. Instantly, they were broke. Now these are extreme issues, but each day there area many people who invest their hard-earned money in similar ways.
Diversifying your investments will hedge against this type of investing. Most of the time, you will avoid catachlysmic shifts in the economy, but there are no guarantees. It is good to have a portion of your portfolio invested in real estate, some in stocks, some in bonds, and some in moeny market funds. Again, the percentages of such depends on your risk tolerances along with what your short term and long term goals include.
In simple terms, there are two types of investments...one where you loan money to someone and the type where you own something. Loan investments are designed to provide a stable source of income but don't protect you from rising prices. Owned investments, such as mutual funds that invest in stocks, are designed to protect you from rising prices but have a return that fluctuates.
For money you plan to use in the next 1-3 years or for that portion that you must have to provide income, it is better to rent your money...to use a type of loan investment. Make sure that you understand that not all investments are created equal. There are many choices and some are better than others. It is advisable to diversify further within a given category. When you invest prudently, you Empower Yourself.
Be aware of investments that attemp to meet all of you needs in one product. Remember..if it sounds too good to be true...it probably is! Look for the best investement based on your risk parameters. This will give you better control and flexiblity...Empower Yourself!
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