Invest Wisely: An Introduction to Mutual Funds. This book goes over the basics of investing in mutual funds, including how they work, what to think about before investing, and how to avoid common mistakes.
Financial Navigation in the Current Economy: Ten Things to Think About Before You Invest
You may be wondering if you should make changes to your investment portfolio in light of recent market events. We can’t tell you how to handle your investments in a volatile market, but this Investor Alert will give you the information you need to make a good choice. Before you make a choice, think about these important things:
1. Draw a personal financial roadmap
Sit down and take an honest look at your whole financial situation before you decide to invest. This is especially important if you’ve never made a financial plan before.
The first step to investing well is to figure out your goals and how much risk you are willing to take. You can do this on your own or with the help of a financial expert. You can’t be sure that your investments But if you learn the facts about saving and investing and stick to a smart plan, you should be able to gain financial security over time and enjoy the benefits of managing your money.
2. Figure out what your comfort zone is when it comes to taking risks.
Every investment comes with some level of risk. Before you buy stocks, bonds, or mutual funds, you should know that you could lose some or all of your money. Unlike money you put in banks or credit unions that are insured by the FDIC or NCUA, the money you put into securities is usually not federally insured. You could lose your principal, which is the amount you’ve put in. Even if you buy your investments through a bank, this is still true.
When you take risks, you might get a bigger return on your investment. If you have a long-term financial goal, you are more likely to make more money by carefully investing in asset categories with more risk, like stocks or bonds, rather than limiting your investments to assets with less risk, like cash equivalents. On the other hand, putting all your money into cash investments may be a good choice for short-term goals. People who invest in cash equivalents worry most about inflation risk, which is the chance that inflation will grow faster than returns and cut into them over time.
3. Think about a good mix of investments.
An investor can reduce losses by including asset classes with fluctuating investment returns in a portfolio. Stocks, bonds, and cash have never had simultaneous returns. Market dynamics that benefit one asset class can hurt another. Investing in multiple asset classes reduces the chance of losing money and smoothing out your portfolio’s investment returns. You can offset losses in one asset category with gains in another.
Asset allocation also affects whether you reach your financial goal. . Most financial gurus recommend including stock or stock mutual funds in your portfolio if you are saving for retirement or college.
4. Avoid overinvesting in employers or other stocks.
Diversifying investments reduce risk. Don’t put all your eggs in one basket—obvious. it’s. If you invest extensively in your employer’s stock or any stock, you risk a lot. You’ll lose a lot if that stock tanks or the company went bankrupt.
5. Create and maintain an emergency fund
Most smart investors put enough money in a savings product to cover an emergency, like sudden unemployment. Some make sure they have up to six months of their income in savings so that they know it will absolutely be there for them when they need it.
6. Get rid of your credit card debt with high-interest rates.
Paying down high-interest debt is the best and safest investment option. Pay off high-interest credit card debt as quickly as you can..
7. Dollar cost averaging.
“Dollar-cost averaging” prevents you from investing all your money at once by gradually adding to it. You will buy more at low prices and less at high prices if you invest the same amount frequently.
8. Use “free money” from the job.
Many employer-sponsored retirement programs match contributions. If you don’t contribute enough to obtain your company’s full match, you’re losing “free money” for retirement.
9. Think about rebalancing your portfolio every so often.
Rebalancing means getting your portfolio back to the way it was when you started. Rebalancing ensures that no asset class dominates your portfolio and returns it to a reasonable risk level.
10. Stay away from things that could lead to fraud.
Scammers read headlines. They often leverage high-profile news stories to entice investors. Before investing, the SEC advises asking questions and verifying answers with an impartial source. Before investing, consult friends and family.
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