money (22103)

Investing 101. The market is down and that's what makes this the perfect time to get in. What could be better than buying low and selling high? IF you have never invested, don't be afraid. You can start at any level, with as little or as much as you like. First off, don't invest more than you can do without. No investment is guaranteed, so go into with eyes wide open. In addition, remember risk and payoff have a subtle relationship. Just because something is risky does NOT mean it is a more inflated payoff. It may be merely risky, and therefore NOT a good investment.

If you only have less than $100 to invest don't despair. You can still do better than a bank savings account. Consider how long before you need this money. The younger you are the more time you have. While it is difficult to make money quickly, it is easy to make money slowly. Consider first an IRA. With $100 you can invest in a CD at your local bank. While a traditional certificate of deposit may require a thousand dollars or more, a retirement account rarely has a limit. If you start at age 20 or 18, think how many years it has to compound interest before you are 65! Plus you can deduct the amount you invest from your taxes. If you can make the full amount allowable by law you will do well. And if you can make the full amount allowable by law you may want to consider something with more of a payout than a bank CD.

I would suggest a mutual fund. Mutual funds are made up of pools of investors' money. A money manager takes everything in the fund and invests some here and some there enabling you to spread your risk in ways you can't if you are investing your whole amount in one stock or bond. You can go to a money manager if you feel uncomfortable investigating funds on your own but I suggest you do at least the cursory research yourself. Otherwise you are vulnerable to the investment advisor's suggestions which may be no more than what he was told to push by her superiors in administration.

There are plenty of magazines on mutual funds. Read a couple to get a feel for what is out there. You won't get rich investing as the magazines suggest because by the time something reaches a hard copy print source its old news. You won't do badly though, and the magazines can teach you how to spot trends and make up your own mind about things. All funds have a prospectus available that shows how their money is invested. I used to read these carefully because I personally do not like to invest in ecologically damaging enterprises. I don't invest in cigarette companies either, no matter how diversified they are. I am also not in favor of investing in health insurance companies, as it seems ghoulish to me to mix profit with health care. You may not share these feelings. My point is only that you can learn whatever you need to know from reading the prospectus before you buy.

I also look for a manager with a good track record, by that I mean, they have brought the fund to a profit more years than not. I look for a manager of middle age, unless it is a computer fund, in which case a young person may know more. I shy away from managers close to retirement. After all if the manager shifts right after you buy, you may find yourself in uncharted territory. I also look for a fund with low operating costs. This is shown as a percentage in the prospectus. After all, no matter how much profit a fund makes if it gets taken away from you in the fees, you haven't done well. So pay attention. It's the net not the gross that counts.

If you have more money to invest than a few thousand, my eye is still on real estate. So many properties are currently in foreclosure it seems clear the world will go to those who have capital. Buy it up now and you will see if go up again in value within the next ten years. Even if you don't want to wait a full ten, you can make money on rentals in this economy. Think of it this way, all those people forced out of their foreclosed homes have to live somewhere. Where will they go but a rental? The rental you buy at foreclosure is clearly going to a fraction of what it was when they bought it at the top of the market. Look in your local newspaper to see what apartments and houses are renting for. If that number is more than the monthly mortgage payment, it's a no brainer. You'll be making money from day one, a rarity in the rental market. Usually you have to take a loss in the beginning.

But let's say you don't have even a thousand to invest in, what you can still buy? The lowly savings bond, believe it or not, is still a viable investment. In buying a bond, the most conservative investment instrument, you will not lose your principle unless you cash out too early. Generally the worst that can happen is you don't realize your full gain. A series EE bond is purchased at half its face value. It reaches maturity when it is worth its full face value, which may take ten or more years. However, it can continue to compound interest for a full 30 years making it worth MORE than its face value.

If you bought one savings bond per paycheck and stored them away you would have a nice cache of savings. Some employers are even willing to let you purchase them with pre-taxed dollars increasing your net profit. Think about it, would you really miss $25 per paycheck? It represents a couple of packs of cigarettes or one less meal out. It also represents a habit of planning for the future. Once you have a grand in savings bonds, cash them out for a mutual fund.