Investing an Approach For Today and Tomorrow
Risk, Return, and Portfolio Diversification
This is just a short lesson the will guide you in the right direction if you wanted to invest money. Investing is deliberate approach that can be put to a person advantage if all the information were made available, so that decision could be made in advance to take stake on opportunity in sight.
The first step in investing your hard earned money is to identify the types of first if investing is right for you, and then know where to invest. After you have identified where you would like to invest, a solid approach would be to analyze the risks involved in each decision and how to minimize the risks or even how to sustain your investment activities.
Is investing the right step for me?
This is a question that has to be answered in a leveled manner. If investment is done deliberate matter, meaning that you have written and committed to rules that you will stick by “no matter the situation”, then I say investing is for you. Investing is a balance between fear and greed. The market flocks with an affect that is driven my media, communications and abundance of both useful and non useful. The choice that you as an individual have to make, is
where, how, when and why.
Where do I want to be when I retire?
How much money to I want to live off of
When do want to retire?
Why do I want to have all the previous three inquiries?
The right time to invest
Since your have committed to invest in a deliberate matter you will have to know what you are getting into. Investing money involves risks on the return on investment, and time is the evil partnering factor for the risk. Yes, timing is everything. Did you ever hear about the time value of money? When a person works, the are compensated for their time right? What are the risks associated to the individual not receiving the money that they worked for at a job? Ok, this is the mind set that you will need to have when you are approaching investing? How will your money work for you, you earned it now put it to work for you; do no bury it in the back yard.
So what are the risks in investing? There are two main kinds of risks, those that are systematic and those that are unsystematic. Some risks can be minimized based on trends that are available in the market while others are just doomed and cannot be fixed no matter which approach is taken. Unsystematic (separated to specific industries) risks can be minimized with increased investments, that may be either within a similar or different market; this risk is minimized as increasing number of investments are made. How ever systematic risk cannot be avoided no matter how many investments are made. Example of systematic risks is when a country has a recession or funds wars.
Currently the market is incubated with systematic risks, experts suggest that within the US and around the globe that the system is in a recession. What does that mean, stability is non existent and risks are increased or not controllable. A good resource to use any time to research system conditions is by going to the Economic Indicators Calendar, which provides the date and time of key economic data releases. If you are within the US or investing in the US you may also want to consider US Census Bureau. Use as many resources as you can to develop an idea of the current systematic conditions, before you decided to invest.
Where to Invest?
The big question where to invest? This is where more research comes into play. A first stop could be to view all the different types of Retirement Plan Terms, for starters. If you want to invest in the stock market, I suggest trying out the Stock Market Game or even paying a visit to the official Wall Street web site.
After you have identified where you would like to invest, a solid approach would be to analyze the risks involved in each decision and how to minimize the risks or even how to sustain your investment activities. Improving diversification of your investment:
Choose different investment tools (stocks, mutual funds, bonds, and cash)
Mix strategies with the different types of securities: Mutual Fund Investment – growth funds, balanced funds, index funds, small cap, and large cap funds.
Further Mix the securities into different locations (local vs. globe & different industry spread)
Why is all this important? – Retirement, not working to live or living to work. Its all about a smarter approach to life, like saving for a rainy day.
Suggested Research Resources
Making the ‘Right’ Investing Decisions in 2009 — and Beyond – Available online
Determining where you are and where you want to be – Available online