Beginners Guide to Investing

The prospect of investing can feel daunting to many, but a beginners guide to investing may dissipate anxiety and help you to find the investment opportunities that are right for you.

1. Review Your Finances

Before you can begin to look investing, you need to evaluate your financial situation and the best way is to organize the details on paper. Total assets minus liabilities determine net worth:

Assets

• Cash
• Money accounts such as checking, savings
• Investments, including retirement
• Real estate
• Insurance (cash value)

Liabilities/debt

• Loans: school, business, car
• Mortgage
• Credit cards

You should also review your monthly budget, including all income and expenses as well as explore your short and long term financial goals such as investments and major purchases.

2. Learn the Lingo

A beginners guide to investing requires you learn the basics. This will allow you to have some understanding of what an investment does for you. The most common investments are:

• Certificates of Deposit (CDs), low risk investments purchased through banks or brokerages that earn more interest than savings/checking. accounts. CDs can be converted into cash before maturity for a small fee.

• Bonds are relatively low risk debt securities where investors are, essentially, loaning money. The primary bond categories are government, municipals and corporate.

• Stocks shares are ownership in a company; when the company does well, shareholders are rewarded with high earnings and vice versa. Stock investments come with the highest risk and greatest potential for gain.

• Mutual Funds contain stocks, bonds or a combination. They provide investors a means to diversify his/her portfolio.

In addition to obtaining basic knowledge about the type of investments, you should also be aware of various fees and expenses associated with each option.

3. Know Yourself

You need to be comfortable with whatever investment choices you make and, as a rule, should avoid any investments that would cause you to lose sleep.

The three primary investment styles are value, blend and growth. Investors who focus on value invest in equity they feel is underpriced but has the potential to increase; growth investors purchase equity with high growth potential to maximize gains; blend refers to portfolios or funds containing a combination of value and growth stocks.

Even more important - is identifying your risk tolerance. Aggressive, high-risk investors are willing to take chances and weather extreme fluctuations in hopes of long-term gains; conservative investors choose low-risk options, such as blue chip stocks, bonds and money market funds.

Tolerance can be related to age, as retirement or individuals living on a fixed-income tend not to make high-risk investments.

4. Investing

You can invest on your own, through on-line trading sites or mutual fund families, at a bank or choose a financial advisor and brokerage house. Your comfort level and understanding of investing coupled by the various fees associated with each of these options will factor into your decision.

5. Evaluation

Once you've invested your money, you should evaluate the performance of your investments. A beginners guide to investing should stress that you are not married to your investments, you can choose to purchase or sell stocks, bonds or funds. In addition, you may need to restructure your portfolio to reflect changes in investment style and/or risk tolerance.

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