Investing money into stocks, bonds, mutual funds and options can be the absolute best way to make a good rate of return on your money. Investing for long periods of time can yield results that change small amounts of capital into very large amounts. If done properly, the investment can also carry very little risk in exchange for a steady return, but where are the best places to put your money to achieve this?
Whether you are a wall street master of finance or a beginning investor who is considering the many mediums in which to invest your hard-earned money, the first step in choosing the safest and best financial market is to look at the performance history of all of the markets. There are many investment vehicles out there from stocks and bonds to options contracts. The best way to measure each is by viewing their historical performance over long periods of time. Financial newspapers and websites can be invaluable resources to perform this research, but personal finance advisers can also be a great help in making the smartest decisions.
Select a financial advisor who will help you understand what needs to be done with your money and why it should be done a certain way. Make no mistake that there are plenty of finance advisors out there who are willing to spend your money for you and never explain a thing until your investment disappears, and by then it is too late. This is why it is highly recommended to screen financial advisors before making a final selection. One great resource for finding an extensive list of helpful providers is finance expert Dave Ramsey's website (see Resources below), which provides an extensive list of service providers across the country. The people listed on this site are endorsed by Dave's team as people who will help you to understand the process as they guide you in making the best decisions for your needs and desires. Just go to the website and click on "Endorsed Local Providers" to see a listing of people in your area.
Know that, whether you have chosen to invest alone or have selected an advisor for help, the key to successful investing is to have diversification in your portfolio. Investment diversification simply means that you have spread your money out over a large group of investments so that if one stock or group of stocks plummets, there will be plenty of others remaining stable or increasing in value to offset the loss. Because being well diversified can cost a great deal of money when investing in individual stocks, many people prefer to use mutual funds as their investment vehicle of choice. Mutual funds provide instant diversification at a low price, and can be very stable alternatives to investing in single stocks or options.
Choosing a mutual fund is a simple process in which you will find a long list of funds to choose from and can view their averages over periods of 1 year, 3 years, 5 years or more. The key to finding the best funds is to choose from the ones that have a minimum of 5 years history to view and a consistent rate of return over that time, poor market conditions not withstanding. A good rate to expect from these funds is between 10 and 15 percent. Many mutual funds offer a much greater average return, but also choose to invest in riskier stocks in order to achieve that rate of growth. Be sure to choose a fund that meets your expectations both for rate of return and reliability, and be willing to leave your money in the fund for at least 5 years in order to see the average rates of return apply to your investment despite fluctuations in the market.
There are various types of mutual funds to choose from when investing. A strategy that diversifies the mutual funds often yields the greatest return while incorporating very little financial risk. The different types of funds are growth, aggressive growth, growth and income, and international. In order to further diversify a portfolio, it is recommended to spread investment capital evenly between these groups to achieve the best results. Some types will grow faster than others, but the slower growing funds tend to also be less volatile during times of financial crisis. This is why diversification works so well as an investment strategy.
Mutual funds can be a much safer medium than any single investment option, but only if the funds are regularly tracked by the investor and have shown a stable history over time. Investments of any kind are not guaranteed to succeed in the way that bank deposits are insured by the FDIC, leaving the risk of total loss solely with the investor.
Things You'll Need