I know that a lot of you are probably thinking what’s the first step to investing, especially investing on your own, is to make sure you have a financial plan. How much are you going to invest? And for how long what are your financial goals? Do you understand your tolerance for risk? All investments carry some risk. The next step is research when investing on your own; you are responsible for your decisions. How will you select one stock, bond, or mutual fund over others, Always make sure that all securities are registered with the SEC, using the SEC’s EDGAR database. Don’t purchase solely on stock tips from others. What do you know about saving and investing?
Do you want to see how your financial knowledge measures up against others; A few people may stumble into financial security. But for most people, the only way to attain financial security is to save and invest over a long period of time. You just need to have your money work for you. That’s investing. There are ways your money can work for you. Someone pays you to use your money for a period of time. You then get your money back plus “interest.” Or, if you buy stock in a company that pays “dividends” to shareholders, the company pays you a portion of its earnings on a regular basis. Now your money is making an income. You buy something with your money that could increase in value. You become an owner of something that you hope increases in value over time. When you need your money back, you sell it, hoping someone else will pay you more for it. Compound interests a key aspect of investing. With compound interest, you earn interest on the money you save and on the interest that money earns. Over time, even a small amount of savings can add up to big money and help you achieve your financial goals. Lets say for example you buy a $1 candy bar every day, it adds up to $365 a year. Put that $365 into an investment that earns 5% a year, and it would grow to $465.84 by the end of five years. By the end of 30 years, you would have $1,577.50. That’s the power of compounding. All investments involve some degree of risk. If you intend to purchase securities such as stocks, bonds, or mutual funds, it’s important that you understand before you invest that you could lose some or all of your money. Unlike deposits at FDIC-insured banks and NCUA-insured credit unions, the money you invest in securities is not federally insured. You could lose your principal, which is the amount you’ve invested. That’s true even if you purchase the securities through a bank. The reward for taking on risk is the potential for a greater investment return. If you have a financial goal with a long-term horizon, you may make more money by carefully investing in higher-risk assets, such as stocks or bonds. On the other hand, investing solely in cash investments may be appropriate for short-term financial goals. The principal concern for individuals investing in cash equivalents is inflation risk, which is the risk that inflation will outpace and erode returns. So if you’re in the market of investing your assets do your homework first and do some research on line or speak to a professional investor to get you on the right track.