Investing
Advice on making wise investments
The world of personal financial investing is complicated, and if you're just starting out, it's best keep your focus narrow and simple. Don't be discouraged by the complexity of personal investing; if you start with safe and simple investments, you'll gain insight and experience that will make investments a reliable and exciting way to boost your earning power.
The Stock Market
Historically, owning corporate stocks has been the best way to build personal wealth. There are four major ways to invest in the stock market:
- Purchasing shares of stock through a retirement plan such as a 401k or a 403b
- Buying stock through a Traditional IRA, SEP-IRA or Roth IRA account
- Stock investing via a brokerage account
- Buying stock through a direct purchase plan or DRIP (dividend reinvestment plan)
Most investors hold stocks in a traditional brokerage account, which are available through local stockbrokers or by using online investing services to trade stocks. To locate a good stockbroker, start by asking for referrals from family members and friends and searching for ratings of brokerages on impartial websites.
A traditional broker is an asset to your personal investing plan, as brokers typically offer input on which companies you should invest in and which you should avoid. They can also base their input and advice on the personal investment goals you communicate to them.
On the other hand, you may decide to take a more active role in selecting your stocks; if so, become familiar with the documents used to evaluate the financial stability of a company to help you make good decisions. These documents include the 10K, the 10Q, the Proxy Statement and the company's Annual Report.
Mutual Funds
If investing in the stock of individual companies seems too tedious or too risky, a mutual fund could be the right investment vehicle for you. A mutual fund is basically a pool of money provided by individual investors to purchase a number of stocks. A mutual fund manager serves to invest the money and manage the mutual fund. Different mutual funds have different goals; for example, some funds try to provide the highest yields, while other funds focus on long-term growth.
Real Estate Investing
Besides owning your own home, investing in property can be a great way to grow your money while providing balance to your investment portfolio. If you lack the motivation to be a landlord, perhaps a REIT (real estate investment trust) is a better option. With a REIT, properties are managed by real estate professionals, and you can invest almost any amount in shares of a REIT, even as low as a few hundred dollars. Usually, REIT shares are traded publicly on the major stock exchanges.
