How To Make Smart Investments

Taking Control of Your Investments

Do you live beneath your means?  Or are you keeping up with your neighbors?  If you are living beneath your means, pat yourself on the back because you might just have some money to invest with.  But if you are trying to keep up with your neighbors, then you might want to think about moving to an area that you really can afford.

Step 1

You won't get rich overnight.  You know the old saying: "If it sounds too good to be true, it is."  Live by these words.  Get rich overnight schemes do not work.  Think about it...  If it did, don't you think more people would be living high on the hog?

You have to work for the "real" money.  A house can't be built overnight. You can't lose weight overnight.  You can't make it rich overnight.

Step 2

Make sure you understand what you are investing in before you invest.  Ask questions; look for information online, in books and on T.V.  Information is everywhere and information is everything.  Information is power.

If you are new to stocks, why not take a stocks 101 class through your local college.  This will give you the basics to get started.  And the teacher has already been paid, so they won't be steering you into one direction, when you should be going in another.

Step 3

Don't let the experts tell you what to do with your money.  Don't let them talk you into something you don't want just because you think they are the experts and they should know. 

Experts aren't always right.  Experts tend to go with the flow.  If everyone is buying up this stock, they think it is the right thing to do, so they pass that along to you.  Sometimes it is, but more often it isn't the right investment.

If you have done your research, then you are armed with the information you need to make the right choices for your money.

Step 4

Remember...Free is going to cost you!  You heard me.  When it comes to investing your money, if you hear the words "won't cost you a thing," or "no risk involved," then you should run in the other direction.

To make money you have to spend money.  Spend the money you and your family are comfortable with.  If you can't afford it, don't do it. 

Step 5

So what are some smart investment choices?  Mutual funds can be a good investment as long as you remember a few things:

  • Don't pay someone to recommend a mutual fund.  You can do a little research and find the best mutual funds for you and you aren't paying a commission to do it.
  • Make sure you understand the "expense ratio" of a mutual fund.  Basically, this is what it will cost you to have this mutual fund.  There can be some hidden fees, which might cost you something each year.  Look for low expense ratios of 1.25% or less.
  • It is best to be a long-term investor if you are investing in mutual funds. If you only want to "try" mutual funds for a short period of time, then you will want to stay away from mutual funds that have "contingent deferred sales charges."  Just make sure you understand all charges that you will be responsible for if you sell your shares.
  • You will also want to be careful of "when" you buy your mutual funds.  Never buy mutual funds just before they are going to make a dividend or capital-gain distribution.  You will be paying taxes on money that was made before you even invested in it.

The bottom line is this: You want to be in charge of your money.  Be your own investment adviser.  Learn what you can before you invest.

When you want to buy a new car, do you ask the car salesperson which car they think you should buy?  Think of investing the same way.  You want to be in control and know everything about that car before you buy it to get the best deal.  Same goes for investing your money.  Don't invest in the lemons, invest in the lemonade.


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