Invest Correctly!
Now that you’ve decided to forego the purchase of that latest and greatest toy you “needed”, it’s time to ponder over the investment options you have. Oh, there are many choices and depending on whom you ask, there are just as many best ones. But here is a question that should help you make a choice more quickly: How risky is it? By that, I mean: how high is the risk of you
losing a significant portion, if not all if your investment during an economic downturn? Sure, the stock market offers various forms of investments of various levels of risk and, much more important, transparency to you. In general, there is one rule you can use to determine how risky something might be: The higher the (promised) return, the higher the risk. And if there is one thing you don’t want to do with your “cash buffer”, it is taking risk. Honestly – This isn’t the type of investment you get into because you have more money than you know what to do with. Think about it in the same terms as apply for spending money: What do you need versus what do you want? You need a secure stash of extra cash (no, I didn’t intend for that to
rhyme, but it drives home the point) to pay your “must have” bills during hard times. You may want to grow your investment as fast as possible, but you’ll sacrifice security for higher return. So stay away from high return promises when you invest in your cash buffer for hard times. The reason? – If you aren’t the only one with financial problems, then it’s likely that the whole economy has a problem. In that case, the higher the risk, the higher the loss. But you wanted a security blanket, not an air cushion that deflates with a troubled economy. As far as the actual investment goes, I’m not enough of an expert to give you advise on the different types and compare them for you. You
should talk to a financial advisor about your option since they vary by the amount your want to invest and the length of time you can spare the money. Whatever you do: make sure you can get your hands on your own money, without huge penalties, if you need to. In a bad economy, cash is your friend! Go for half a percent of interest less if you can drop the lock-down of your investment from four to
two years. It’s not a perfect science but you have to get professional help to find the right balance for you. If you absolutely want to invest in the stock market do yourself a favor and learn all you can about stock trading. One of the best resources I found
is the US Securities and Exchange Commission’s website at:
http://www.sec.gov/investor/pubs/investop.htm
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