Investing | The Simple Dollar

What you'll find here

Investing your money takes attention to detail as well as some educated risks. Here, we'll help unpack some best practices so that you can make well-informed and strategic investment decisions.

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Investing 101

Before you get started, here are a few points to consider:

Are stocks and bonds the only types of investments I can pursue?

Though stocks and bonds are usually the most well-known, (and financial advisors suggest they should make up most of your investment portfolio) there are many different types of investments that you could take advantage of. Other types of investments can range from real estate and mutual funds – to CD's and commodities. The important thing is to educate yourself on their differences, and only make the number of investments that make the most sense for your financial standing.

When is the best time to invest?

Investing should really be thought of as an extention of your personal money management. So your first priority should be to make sure your household finances are in a good place before any decisions are made. Advisors recommend that you have three to six months of living expenses saved before making investments. The main reason for this lies in setting up protections against the financial risk you're taking. With how unpredictable the markets can be, you don't want to be in the position of having to take on debt in order to pay for necessities. Essentially, you don't want to use your assets as a primary source of income. You want to use them to grow equity.

Does it really help to diversify my investment portfolio?

Diversifying your investment portfolio absolutely helps in terms of maximizing the process and protecting against market fluctuation. If you invest primarily into one company or industry sector, your money has no choice but to move with those particular markets. However, if you spread your investments around, it will increase your chances of landing on solid ground in at least one market if the others aren't doing so well. If you do get to a place where you're comfortable being a little more active with your investments, it can benefit you to not have all your eggs in one basket.

How closely involved should I be in managing my investments?

Your level of involvement when it comes to managing your investments is up to you. Some track the markets daily, while others leave much of the work to their financial advisors. Whether you're heavily involved or just casually, the most important thing is for you to be aware of what's in your portfolio, and make sure your investments are still supporting your long-term financial goals.