Strategy

Because investing is not a sure thing in most cases, it is much like a game – you don’t know the outcome until the game has been played and a winner has been declared. Anytime you play almost any type of game, you have a strategy.

Strategy is basically a plan for putting your money in various areas that will help you meet your financial goals in a specific amount of time. Each type contains individual goals that you must choose from. A clothing store sells clothes – but those clothes consist of shirts, pants, dresses, skirts, undergarments, etc. In stock market, it contains different types of stocks, which all contain different companies.

If you haven’t done your research, it can quickly become very confusing – simply because there are so many different types to choose from.

If you are new, work closely with a financial planner before making any decisions. They will help you develop strategy that will not only fall within the bounds of your risk tolerance and your style, but will also help you achieve your financial goals.

Never puts your  money without having a goal and a strategy for reaching that goal! This is essential. Nobody hands their money over to anyone without knowing what that money is being used for and when they will get it back! If you don’t have a goal, a plan, or a strategy, that is essentially what you are doing! Always start with a goal and a strategy for reaching that goal!

Determine Your Risk Tolerance

To determine it involves several different things. First, you need to know how much money you have to invest, and what your financial goals are.

For instance, if you plan to retire in ten years, and you’ve not saved a single penny towards that end, you need to take a high risk– because you will need to do some aggressive investing in order to reach your financial goal.

On the other side of the coin, if you are in your early twenties and you want to start for your retirement, it will be low risk. You can afford to watch your money grow slowly over time.

Realize of course, that your need for a high or low tolerance really has no bearing on how you feel about risk.

For instance, if you invested in the stock market and you watched the movement of that stock daily and saw that it was dropping slightly, what would you do?

Would you sell out or would you let your money ride? If you have a low tolerance, you would want to sell out… if you have a high tolerance, you would let your money ride and see what happens. This is not based on what your financial goals are. This tolerance is based on how you feel about your money!

Again, a good financial planner or stock broker should help you determine the level of risk that you are comfortable with, and help you choose your investments accordingly.

Your appetite should be based on what your financial goals are and how you feel about the possibility of losing your money. It’s all tied in together.

Different Type of Investments

Overall, there are three different kinds. These include stocks, bonds, and cash. Sounds simple, right? Well, unfortunately, it gets very complicated from there.

There is quite a bit to learn about each different type. The stock market can be a big scary place for those who have a little background or nothing. Fortunately, the amount of information that you need to learn has a direct relation to the type of investor that you are. There are also three types: conservative, moderate, and aggressive.

Conservative often puts their money in interest bearing savings accounts, money market accounts, mutual funds, US Treasury bills, and Certificates of Deposit. These are very safe that grow over a long period of time.

Moderate often invest in cash and bonds, and may dabble in the stock market. They often also invest in real estate, providing that it is low risk real estate.

Aggressive commonly puts their money in the stock market, which is higher risk. They also tend to put money in business ventures as well as higher risk real estate. For instance, if they put money into an older apartment building, then invests more money renovating the property, they are running a risk. They expect to be able to rent the apartments out for more money than the apartments are currently worth – or to sell the entire property for a profit. In some cases, this works out just fine, and in other cases, it doesn’t. It’s a risk.

Before you start, it is very important that you learn about the different types of investments, and what those can do for you. Understand the risks involved, and pay attention to past trends as well. History does indeed repeat itself, and you should know this first hand!

What Are Your Goals

When it comes to investing, many first time investors want to jump right in with both feet. Unfortunately, very few of them are successful. It requires some degree of skill. It is important to remember that there is the risk of losing your money!

Before you jump right in, it is better to determine what your goals are. What do you hope to achieve? Will you be funding a college education? Buying a home? Retiring? Before you invest a single penny, really think about what you hope to achieve. Knowing what your goal is will help you make smarter decisions along the way!

Too often, people dream to become rich overnight. This is possible – but it is also rare. It is usually a very bad idea to start with hopes of becoming rich overnight. It is safer to put your money in such a way that it will grow slowly over time, and be used for retirement or a child’s education. However, if your goal is to get rich quick, you should learn as much about high-yield, short term instrument as you possibly can before you start.

Again, remember that investing requires more than calling a broker and telling them that you want to buy stocks or bonds. It takes a certain amount of research and knowledge about the market if you hope to success.

Why You Should Invest

Investing has become increasingly important over the years, as the future of job security becomes unknown and you need to be financially survived during such uncertainty.

First, people want to insure their futures, and they know that if they are depending on retirement plans, that they may be in for a rude awakening when they no longer have the ability to earn a steady income.

You may have been saving money in a low interest savings account over the years. Now, you want to see that money grow at a faster pace. Perhaps you’ve inherited money or realized some other type of windfall, and you need a way to make that money grow.

Second, you also want to attain the things that you want, such as a new home, a college education for your children, or expensive ‘toys.’ Of course, your financial goals will determine what type of investing you do.

If you want or need to make a lot of money fast, you would be more interested in higher risk one, which will give you a larger return. If you are saving for something in the far off future, such as retirement, you would want to make a higher return with safer instrument that grow over a longer period of time.

The overall purpose is to create wealth and security, over a period of time. It is important to remember that you will not always be able to earn an income… you will eventually want to retire.