Investing Money in Plain English
Our current economic crisis has brought down housing prices almost to the ground. The cost for obtaining a home today is the lowest in recent memory. This is an excellent opportunity to invest in real estate, to purchase it with the intent of either making an immediate sale or establishing a long term lease, but with credit no longer flowing as freely as it once did everyone is concerned about property investment finance: will the banks and creditors play ball?. The low prices are fantastic, after all, for those who can afford them, but without the aid of a creditor, who can?
What are Mutual Funds?
Mutual funds are professionally managed baskets of securities primarily consisting of stocks, bonds, and money market securities.
What is the Cost of Investing in Mutual Funds?
With the right no-load mutual funds sales charges can be zero, with less than 1% a year deducted from your account for expenses. With the wrong load funds, you might pay 5% or so in sales charges up front, and/or more than 2% a year in expenses.
Who Should Invest in Mutual Funds?
Virtually everyone interested in having a secure, comfortable retirement should give mutual funds serious consideration. These investment packages were designed for the average investor. You fit into this category unless you are extremely rich and financially sophisticated.
When Should I Invest in Mutual Funds?
You should start as soon as you feel you can afford to set money aside for longer-term goals (like retirement). Establish an income and get everyday expenses under control first. Once you have a cash reserve and have taken care of your insurance needs (auto, home, life, disability) you are ready to invest. Investing in mutual funds offer investors of all ages the prospect for higher returns (growth), and/or higher income, and/or competitive interest income with safety.
Where Can I Invest?
Virtually every 401(k) or similar retirement plan offers mutual funds as investment options. You can invest in mutual funds through an investment professional, or you can buy and sell them on your computer through a discount broker. Once you are informed, I suggest you invest directly with a major no-load fund family to avoid sales charges and to keep your yearly expenses low. You can invest in mutual funds in a regular IRA or Roth IRA, and in a taxable account in your name or owned jointly with your spouse.
Why Mutual Funds?
Every investor needs an investment portfolio (list of investments) that is balanced to fit the investor’s risk tolerance. At the same time, your investment portfolio should be tailored to fit your needs in regard to various factors. No single investment will accomplish it all for you. In varying degrees, we all need an investment package that addresses: growth (higher returns), safety, income, tax advantages, and so on.
If you want to, you can juggle an armload of various stocks, bonds, money market securities, and alternative investments. This will require more than just a little time, effort, commitment, and expertise on your part if you are to be successful. Or, you can simplify matters and concentrate your efforts on holding just a few well-selected mutual funds.
How Do I Get Started?
Starting out you need to get up to speed on the basics. To get a handle on mutual funds, you’ll need to know stocks, bonds, and money markets first. Then you need to get the big picture; and put all of the investments in the world into perspective.
Once you have a handle on the investments available to you, you’re ready to learn the art of investing. By maintaining a balanced portfolio, financial success is within your reach.
Asset allocation within your balanced portfolio is the real key to achieving you financial goals. Asset allocation means simply where you have your money invested, and in what proportion.
Which funds should I hold in what proportion?
Keep it simple. Start by concentrating on learning all you can about mutual funds. There is a fund to fit virtually every investor need. Once you know funds, you can build your own portfolio of mutual funds
Resource Author Francisco Rodriguez Higueras
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