Where and When to Invest
Sun, 11/11/2012 - 8:59pm | by Guest Contributor
Knowing how to invest your hard-earned money for maximum potential payoff is never easy. No matter how confident you are about an investment opportunity, it’s always a bit of a gamble. But there are a few ground rules that can help you when it comes to choosing where and when to invest your capital. For example, you might think that a market in recession is a good reason to hold off on investing, but in truth, it could be just the chance you need to show a significant turnaround. In short, there may be a lot of things you don’t know that could stop you from making money when you decide to invest.
Here are a few guidelines to help you out until you get a better idea of how to invest in order to make your money work for you.
1. Hire a broker.
If you don’t have the first clue about what you’re doing, getting an e-Trade account really won’t do you any good. The first thing you should do is find a good broker (ask friends for a referral). You might be nervous about handing over your dough to a stranger, but a good broker can turn your pittance into a pile of money (and earn a tidy sum for themselves along the way). So at least until you understand what goes into making good investments, you’re going to need some help. And there’s absolutely nothing to keep you from working closely with your broker so that you understand every move they’re making.
You’ve probably heard that you need a diverse investment portfolio for the sake of safety, but you might not understand just what that means. There are all kinds of investments, but those most commonly included in a portfolio are stocks, bonds, and mutual funds (all operating are varying levels of risk, with stocks posing the highest risk for loss and mutual funds coming in fairly safe). By spreading your money around, you increase your chances of earning while reducing the risk of losing your shirt. Never put all your eggs in one basket; that’s just common sense.
3. Buy low.
As for when to invest, that’s easy; simply buy when prices are low. Of course, it’s really not that straightforward. The price of an investment may fluctuate for any number of reasons (although right now, the state of the economy seems to be at the forefront). However, you should try to be aware of why a stock is low and the potential for it to improve. If, for example, a big company has had a slow quarter, causing their stock price to drop, you might still want to buy, knowing full well that they’re bound to release a new product soon that will show a bump in sales.
4. Educate yourself.
Poor and stupid is no way to go through life, so make an effort to learn everything you can about investing along the way. This will not only allow you to make informed decisions about where your money is going, but it may also help to ensure that those investments pay off.
5. Get in for the long haul.
Unless you’re a day-trader, it’s unlikely that you’re going to show a good return by buying today and selling tomorrow. So find investments that seem promising and plan to stay in the game for several months, or even years. This will give you the best chance for substantial earnings.