Knowing how to spend your money effectively is hard for most people, especially those who are handling a decent sum of cash for the first time in their lives. So if you’re at a loss as to what to do with your expendable income, you’re not alone. But knowing where and when to invest, learning how to play the market, is not as difficult as you think. Sure, you have to know a lot to become a stock broker, but the average person can make informed decisions about their money management without a lot of know-how or experience by simply knowing where and when to invest. And with a pretty basic knowledge and a little common sense, you could be putting your hard-earned cash to work for you before you know it.
The first thing to learn about investing is when to do it. And that time is almost always NOW! By putting off your investments until the market improves, you could find yourself waiting for quite a while, and missing out on a lot of potential returns. Of course, a market in free-fall might not provide the best opportunities, so you should be wary of anything that looks too good to be true. But a market in recession provides the perfect chance for you to buy low and, over time, show incredible growth. And when it comes to accounts like Roth IRAs, for example, where you put in money, it is invested (safely) for you, and you can’t touch it until retirement, you can never start too early. The longer that money sits, the more you’re going to earn (read: compound interest is your friend). Unfortunately, Roth IRA contributions are not tax deductible like regular IRA accounts, but you do get compound interest, which is a win.
Now comes the hard part: where to invest. This is not something you want to decide on your own at first (at least until you’ve learned a bit about how stocks and bonds work), so don’t rush in and buy up all the stock you can in a risky pharmaceutical venture. Instead, think about engaging the services of a professional from a brokerage firm. These people are trained to invest your money and give you advice, so take advantage of their expertise in the beginning. Many of them are happy to answer your questions and they may have brochures on hand to explain different types of investments to you.
There is one thing you should ALWAYS do when you invest, and that is diversify. Even kids know you’re not supposed to put all your eggs in one basket. If you want to gamble, go to Vegas. Investments are meant to be a long-term strategy for your money, not a roll of the dice. Spread your cash around by considering stocks, bonds, mutual funds, CDs, IRAs, a 401K, heck, even a savings account. And of course, you can always invest in real estate. Whether you’re looking for a family home or you want to flip it when the market rebounds, now is a great time to put some money into a foreclosure or short sale. If you play your cards right, you have the potential to exponentially increase your money down the road.
Sarah Danielson writes for Purchase Order Funding. With PO financing you can grow your business and pave the way for more.
This blog post does not constitute as financial investment advice, check with your own financial manager before investing.
Comments on this entry are closed.