What Should I Invest In?
There is no pat answer to this question. It is a high individual choice and will be different for every person. Some investments are volital (they go up and down a lot) and some are not; some investments are risky and some are safe; some people won't need their money for a long time, but some will need it before then; some people are old, but some are young; some people are willing to spend a lot of time managing their investments and some aren't; some people are good at investing and some aren't. Where do you fit into all this?
Take a moderate approach. Let's say you are a young and have finally come up with some surplus money with which to invest. First open a money market account at your bank and put the money in there to use as an emergency fund if you really need it. After you have set aside a reasonable emergency fund (maybe a month's salary), try buying some bank certificates of deposit, something safe and easy. Just sit back and watch your money grow. Buy the CD's for different lengths of time so that they don't all come due at once.
Some people never get past investing in bank CD's and this is fine. If you don't have the interest or time to put into studying investing, or don't have much tolerance for risk, then bank CD's will continue to grow and multiply. You will be getting interest on your interest, and with time it will grow into a nice nest egg.
Most advisers would suggest that you move into buying stocks at some point. The quickest and easiest way to do this is to purchase no-load mutual funds. They charge no up-front sales fee, so all your money goes to work for you. The mutual fund buys stocks for all its customers and you own a portion of this big pot. You will actually own a small amount of many different stocks. Try signing up with a large mutual fund company such as Fidelity or T. Rowe Price. First, just buy a mutual fund that specializes in the big companies, the so-called large cap or blue chip stocks. You should regard your mutual fund as a long-term investment. Just buy a small number of shares and plan to hold it a long time - years or decades. Then you can add to this investment as time goes by.
Mutual funds may specialize in a certain type of stock or bond, so you may want to branch out into other kinds of funds such as foreign stocks, small companies, government bond funds, etc. By spreading out your money over several different kinds of investments you are getting diversification which protects you a little more. Some people are always buying and selling mutual funds, others just buy and hold. This is an individual choice, but most experts suggest the buy-and-hold method as the best way to come out ahead over time.
After you've invested for a long time you should own numerous bank CD's and a diversified group of mutual funds. If some of these are held inside an IRA or other retirement plan, all the better.
Some people may choose to invest in individual stocks. It takes time to research and manage your stocks, but it might pay off for you if you are lucky and skillful. The person who invested in Cisco Systems in 1994 probably had no idea the stock would increase 20-fold over the next six years. If he sold out then he did well. Shortly after that, the stock took a big hit in the tech-wreck and lost most of its value. If you don't have to stomach for such ups and downs, just stay away from individual stocks. Be prepared to put a lot of time into evaluating and monitoring your stocks.
If you really want to get involved, there is always real estate. It takes expertise and effort to make money with this investment, but fortunes have been made there.
Some people like to have a small amount of money invested in gold coins sitting in their safe deposit box. They don't pay dividends and may go down in value, but will never totally lose their value.
Take a moderate approach. Let's say you are a young and have finally come up with some surplus money with which to invest. First open a money market account at your bank and put the money in there to use as an emergency fund if you really need it. After you have set aside a reasonable emergency fund (maybe a month's salary), try buying some bank certificates of deposit, something safe and easy. Just sit back and watch your money grow. Buy the CD's for different lengths of time so that they don't all come due at once.
Some people never get past investing in bank CD's and this is fine. If you don't have the interest or time to put into studying investing, or don't have much tolerance for risk, then bank CD's will continue to grow and multiply. You will be getting interest on your interest, and with time it will grow into a nice nest egg.
Most advisers would suggest that you move into buying stocks at some point. The quickest and easiest way to do this is to purchase no-load mutual funds. They charge no up-front sales fee, so all your money goes to work for you. The mutual fund buys stocks for all its customers and you own a portion of this big pot. You will actually own a small amount of many different stocks. Try signing up with a large mutual fund company such as Fidelity or T. Rowe Price. First, just buy a mutual fund that specializes in the big companies, the so-called large cap or blue chip stocks. You should regard your mutual fund as a long-term investment. Just buy a small number of shares and plan to hold it a long time - years or decades. Then you can add to this investment as time goes by.
Mutual funds may specialize in a certain type of stock or bond, so you may want to branch out into other kinds of funds such as foreign stocks, small companies, government bond funds, etc. By spreading out your money over several different kinds of investments you are getting diversification which protects you a little more. Some people are always buying and selling mutual funds, others just buy and hold. This is an individual choice, but most experts suggest the buy-and-hold method as the best way to come out ahead over time.
After you've invested for a long time you should own numerous bank CD's and a diversified group of mutual funds. If some of these are held inside an IRA or other retirement plan, all the better.
Some people may choose to invest in individual stocks. It takes time to research and manage your stocks, but it might pay off for you if you are lucky and skillful. The person who invested in Cisco Systems in 1994 probably had no idea the stock would increase 20-fold over the next six years. If he sold out then he did well. Shortly after that, the stock took a big hit in the tech-wreck and lost most of its value. If you don't have to stomach for such ups and downs, just stay away from individual stocks. Be prepared to put a lot of time into evaluating and monitoring your stocks.
If you really want to get involved, there is always real estate. It takes expertise and effort to make money with this investment, but fortunes have been made there.
Some people like to have a small amount of money invested in gold coins sitting in their safe deposit box. They don't pay dividends and may go down in value, but will never totally lose their value.