| For
many of us, investing can be a mystery--full of terms, strategies,
and investment choices that are intimidating. But you are on the
right track if you are already thinking about it; the next step
is to take action. Before you begin though, you will want to be
sure that you are in a position to invest. First, you will need
to have your credit card debt, if you have any, under control. Second,
you will also want to have an emergency fund in place for life's
unexpected turns. As a rule of thumb, your emergency fund should
be enough to cover at least 3 months (and preferably 6 months) of
your basic living expenses. And lastly, if you're employed and your
employer offers a 401(k) plan, that you're contributing the maximum
and diversifying your investments in the plan. Why
invest? The
simple answer to that is to create wealth. By investing and planning
for the future, you can prepare yourself for life's major events
such as buying a house, starting a family, retirement, etc. Consider
this, if you are in your early 20's and if you could set aside $4
a day for 250 days, you would have $1,000 to invest in a once a
year investment with an annual return of 11% (the annual stock market
return since 1926), your investment would grow to more than $1 million
after 46 years. Remember time is the investor's biggest ally, so
start early! Where
do I find the money to invest? Great
question! You probably need less than you think to start investing.
Many funds allow you to invest $500 or less. Or you may be able
to skip the initial lump sum investment if you sign up for automatic
monthly withdrawals of $25-$50 from your checking account. This
is a great idea anyway since you don't miss money you don't really
see--if you don't see it, you won't spend it. In keeping with this,
is the idea that you should "pay yourself first."
When paying your bills, just add one more to the list--and pay yourself
first. Another idea is to use "found" money such as a
bonus from work or your tax refund.
How
do I choose an investment?
First,
you need to decide what your goals are. What is that you are saving
for? A house? An education? Retirement? This is important to know
because the type of investment that is right for you will depend
on how long it will be before you need the money. Stocks, bonds,
and mutual funds are considered to be long-term investments, and
you should count on holding on to them for at least 5 years. Short-term
investments would include savings accounts, money market funds,
and certificate of deposits.
Where
do I find more information about stocks and mutual funds?
One
of the best ways to learn more is to browse the Internet. There
are many websites available to provide the information you are
looking for. Once you have found one that fits your needs, you can
contact them and request a prospectus (a description of the fund,
its investments, and how it has performed) and an investor's kit
and you are on your way!
Additional
Resources:
Fundamentals
of Financial Planning
click
here
Getting
Started as an Investor
click
here
Investing
Basics
click
here Bankrate.com's
Investing Checkup click
here
Learn
the Basics
click
here Yahoo
Finance's Beginning Investing click
here
Taking
the Initial Steps
click
here Investorguide.com
University click
here T
Rowe Price's ABC's of Investing click
here Quiz--Do
You Know Enough About Investing? click
here |
