26 September 2011

Three Investment Advices that Beginners Need to Know

To an inexperienced eye, the art and science of smart investment is more like voodoo magic than it is calculated risk. But, as with poker, all is not random chance or luck; there is skill involved with investment, there is strategy, expertise, and prediction that all go into making a good investment decision.

Many people are discouraged, though, by the complexity of investment, and settle for steady, stable jobs, instead of making unwise or uninformed investment decisions. While this is probably a wise move—you really shouldn't invest if you don't know what you're doing—you shouldn't keep a lack of knowledge keep you from investing if you're interested in it, or just want to make some extra money. The key is to just research and then apply that knowledge. And you can start that research right here, right now, by reading these three investment-beginner pointers.
It's Not Just About Money
Always remember that investing is not only about money, but it is also about having a vision and goal. Investment offers delayed gratification, and generally pays off better in the long run; therefore having a goal to work toward can be very helpful. Knowing, for example, that you plan to retire early and live an extravagant lifestyle, full of international travel, penthouses, and performance cars will have a profound effect on your investment strategy and choices. (You'll probably have to invest quite a lot of money now to reach that goal, by the way—more money, in fact, than some people ever make. So if that's your dream, better get started.)

Think In Terms of the Return
The basic principle of investment is simple: it works with interest. You are essentially allowing some entity to hold your money while you gain interest on that money depending on their success. So, with that in mind, the rate of return of a fund is probably the most important thing to watch for, especially as a beginner. Guaranteed investments only offer an average return of 2.5%—contrast that with the DOW, which may have its ups and downs, but still averages at around 10%, and you'll know which to go with. As a rule, the market will be more profitable for you than any other kind of investment, but even within the market, when you are trying to decide where to invest, always ask prospective funds or indexes for their return rates for the last 5 to 15 years. If your prospective fund did not do as well or better than the DOW, you probably will want to reconsider.

Time is Money
Every second that goes by is another cent or dollar that you could have made in investment. You don't want to jump into a decision, but at the same time, you also don't want to deliberate forever. Ideally you will work as fast as you can to get all the information you need, and then make an informed decision. It might not seem like it, but as little as ten years can translate into $500,000 or more—and while a ten year decision seems unlikely, some people do wait a long time to start investing. If you're going to do it, prepare early and start investing as soon as you can.

Author bio:
Mariana Ashley is a freelance writer who particularly enjoys writing about online colleges. She loves receiving reader feedback, which can be directed to mariana.ashley031 @gmail.com.


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