 |
 |
 |
|
|||||
|
Current Pension Topics: How to Lessen Risk In Your Investments Current Pension Topics
The Next Step With a few dollars put aside, you've got to decide what to do with them. After all, you worked hard to earn your money, now you want it to work hard for you. Financial security doesn't just happen. It takes planning, investing, and commitment. Many people would like to invest but fear the risks. When investing, it's important to make a conscious decision about what portion of your money will be in relatively safe investments and what portion will be in riskier ventures with a possibly higher payoff. One way to lessen your risk is to diversify your portfolio. If you own stock, for example, it's better to own several (in various industries) rather than just one or two. If your nest egg is small, one way to diversify is to purchase shares of a mutual fund which holds many kinds of investments. It's also a good idea to keep some of your money in liquid assets, from which it can be easily withdrawn. With all investments, be sure to understand what return, if any, is guaranteed, and what is merely estimated. Find out about sales commissions and management fees before you put money into an investment and take these items into account when figuring your potential return. A Few General Rules Beware Rule 1. If any savings or investment plan sounds too good to be true, it probably is. There is no shortage of people willing to promise you anything to get their hands on your money. Use your good judgment in determining reasonable expectations. Determine Risk Rule 2. The greater the return or the higher the interest rate, the greater the risk that you may lose some or all of your money. On the other hand, if you lower the risk, the return or interest rate is usually lower. There are other risks besides the possibility that an investment will go down in value. You must consider the impact of inflation. If you put $100 in an insured savings account that earns three percent interest, but inflation is running at 3 percent, your money would actually lose buying power faster than it grows with interest. Diversify Rule 3. Don't put all your eggs in one basket. How you save may be as important as how much you save. Diversify — put your money into a variety of investments. This will generally reduce your overall risk. In this way, a loss in one type of investment may be offset by gains in another type. Learn Rule 4. Do your homework. Never invest in anything you don't completely understand. Read financial papers and magazines. Many are available at your public library, if you don't want to subscribe to them yourself. Tune in to any of the many Wall Street investment-related programs on radio or TV. Do your research on the web. Seek a Financial Expert Rule 5. Don't be afraid to get expert help. Choosing a financial planner, investment broker and/or insurance agent is like choosing any other professional — you have to do your homework. Be sure you know exactly what you're buying before you purchase anything. Check their credentials: — What is their educational background? — Are they certified? — What is their experience? — Do they have your best interest in mind? Ask for references — ask your friends: — What is their reputation? Ask for a meeting: — Will they offer a free consultation? Ask questions: — Will you incur any fees and costs? — How are they paid? Remember, it's your money, invest wisely. This 5-step plan is for information purposes only and is not intended to provide specific individual financial, legal, investment plan or tax advice. |
      |
||||
