Posts Tagged investing

Prepare to Invest

Whether you want to save for retirement, pay for your children’s college, or buy a new house, making the right investment choices will allow your money to make you even more money in order to fund your goals.

Now that my husband and I are on a solid financial footing, we are ready to start investing. There are times when this process has seemed intimidating, but thanks to a great, and patient, advisor we feel more prepared and sure that we are going to be making the right decisions.

Set Your Financial Goals:

You’ll want to sit  with your investment adviser and review a list of your financial goals. Based on your prioritized list and the time frame that you have to meet that goal, your adviser will then begin the work of coming up with some investment options and be able to give you a monthly amount that will need to be invested.

Learn About Your Investment Options:

There are many options available when it comes to investing. The long list of possibilities includes stocks, mutual funds, savings bonds, annuities, exchange-traded funds, money market funds, and U.S. Treasury securities. You may also be interested in investing in real estate, precious metals, or commodities.

With so many options available, it is important to educate yourself on the risks of each type of investment and make sure the risks are appropriate for you. We all love the idea of our money working for us, but it’s also important that you can sleep easy at night knowing that you are comfortable with the investment strategy that you have selected.

Gauge Your Risk Tolerance:

How much risk you are willing to take on depends, for the most part, on how much time you have before you’ll need the money. If you are not retiring for another 30 years, it would make sense to take a riskier approach and perhaps consider investing in more aggressive funds or forms of investment. Time is on your side, and you are in a better position to weather the ups and downs that the market presents.

If you need the money in 5 years or less, you would be looking at a less risky investment such as a bond or a money market account. Although these don’t have the high rates of return that a more risky investment would have, you are much less likely to cash out at a loss if the market takes a tumble.

Diversify Your Investments:

We’ve all heard the phrase, “Don’t put all of your eggs in one basket.” By diversifying your investments you are safeguarding your money. The idea of course being that if one investment loses money, the other investments make up for those losses. In the case of a down market, although your investments may suffer, they won’t suffer as much as they would if you weren’t diversified.

don't put all your eggs in one basketI had a former co-worker learn this lesson the hard way. When the tech bubble was going strong, he invested all of his money earmarked for retirement into tech stocks. When the tech bubble burst, so did his dreams of retirement, and as a result had to continue in the workforce past his original retirement age.

Be on a Solid Financial Foundation:

Before you start investing, you want to make sure that your financial foundation is set. You want to be on a monthly budget with a positive cash flow so that you know how much you have to invest each month.

You also want to make sure that your consumer debts and student loan debts are paid off, freeing up even more cash flow to save and invest with. Last but not least, you want to also ensure that you have an emergency fund with three to six months worth of expenses in place so that if the unexpected happens, you are not pulling money out of your investments.

Don’t Forget to Ask Questions and Educate Yourself:

With the internet and Google, it has never been so easy to find information, but sometimes that information can be as overwhelming as the thought of investing if you are just getting started. The Securities and Exchange Commission has a lot of great information if you are in the beginning stages of investing.

Also consider asking for referrals to a trusted financial adviser. Ask family, friends, and colleagues if they work with someone that they trust and recommend. My Dad’s advice when it came to looking for a good financial adviser: Don’t invest with anyone who has a smaller net worth than you.

Your Turn!

  • What is your biggest financial goal?