Free Investment Guide - Shortcuts And Tips

For those new to the investing world, here is a free investment guide that offers you some shortcuts and tips to get the most out of your investment.

Whenever you want to make an investment, there are numerous factors you need to consider to make a decision. In most cases these factors will be your own research, market trends, a friend’s advice or sometimes even pure market speculation. While there are no shortcuts as such to make good investments, here is some sound free investment advice that can get you on the road to success:

Identify Your Options in Accordance to Your Risk Preference

The most common investment tools are certificates of deposit, bonds, mutual funds and the stock market. Some investors also like to invest in property markets. You should thoroughly research your opportunities and weigh their pros and cons before making any investment decisions. An important consideration is to identify your risk preference. For example, you may not want to risk your seed capital, in which case you may want safer investment tools, but remember they are low yielding investments. Examples of such investments are savings accounts and certificates of deposit.

On the other hand, you can opt for high yield investments, which may result in higher returns. The tradeoff is a higher risk. You can choose stocks or mutual funds.  Also, there are brokers or professional investment advisors help guide you.

Stick to Investment Horizons & Focus on Long Term Commitment
In most scenarios, you can typically earn better returns if you lock in your investment for a longer period of time. For example a certificate of deposit will earn more interest when placed in five year terms as opposed to a one year term. Stocks may exhibit short-term volatility, but the research shows that markets rise consistently over the long run, so a longer investment term would be beneficial.

For a sound investment strategy, the most important thing is that you should be prepared to invest on long-term basis. It is especially important to stick to term durations in certificates of deposits since early withdrawals on these instruments can result in significant penalties and erode any profits that you may have earned. Make sure you verify your liquidity needs before you commit to investments.

Diversify Your Portfolio

Whenever making investments, diversify. External variables, such as economic and political conditions, may affect one kind of instrument, but not another. You should also have a mixture of instruments that provide sustainable long-term growth such as mutual funds, and others such as bonds that will provide returns in the form of regular coupon payments. It would also be wise to have a certain percentage of your portfolio in a money market fund to have secure growth and maximum liquidity.

Make Your Investments Tax Efficient
There are many options that you can exercise to help your investments grow faster, and you need to ensure that you are aware of these options to streamline your investments and minimize taxation elements that may erode your returns. For example, if you are married and have a combined income of less that $150,000 per annum, you are eligible to invest through a Roth IRA account. Contributing through this account into your stocks, bonds and CDs can result in tax free gains provided you withdraw the money as per the guidelines, which can significantly improve your net returns. Investing through proper channels can also allow for certain deductions that you can claim from your income taxes and increase your net income, with a 401k plan being a prime example.

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