Smart investing strategies

At a minimum, investing allows you to keep pace with cost-of-living increases created by inflation. At a maximum, the major benefit of a long-term investment strategy is the possibility of compounding interest, or growth earned on growth. How much should you save vs. Invested wisely — and over a long period — this capital can multiply. How do investments work? Understanding the market: In the finance world, the market is a term used to describe the place where you can buy and sell shares of stocks, bonds, and other assets.

You need to open an investment account, like a brokerage account, which you fund with cash that you can then use to buy stocks, bonds, and other investable assets. Stocks vs. When a company issues bonds on the market, they are basically asking investors for loans to raise money for their organization. Investors buy the bonds, then the company pays them back, plus a percentage of interest, over time.

Stocks, on the other hand, are small pieces of equity in a company. When a company goes from private to public, its stock can be publicly bought and sold on the market — meaning it is no longer privately owned. A stock price is generally reflective of the value of the company, but the actual price is determined by what market participants are willing to pay or accept on any given day. You can buy commodities, precious metals, investment real estate, or foreign stocks and bonds in the market.

There are also mutual funds and exchange-traded funds ETFs , which are collections of stocks, bonds, or other assets that you can purchase shares in; one share of a mutual fund reflects a tiny percentage ownership of a number of assets. Regardless of what type of investment you choose, you buy shares of it through your brokerage or other account. Stocks are considered riskier investments than bonds because of this price volatility.

If bad news comes out about a company, people may want to pay less to buy shares than they did before, which will lower the stock price. If you bought the stock for a large sum of money, you risk losing that money if the stock price drops. Stocks are also riskier because when companies go bankrupt, bondholders receive their money back — stockholders have no such guarantee. Making and losing money: In the market, you make or lose money depending on the purchase and sale price of whatever you buy.

Are you investing reasonably? As a rule of thumb, remember that the best risk an investor can take is a calculated one. But how can you be calculated? You buy shares of stock, and your dividends are automatically used to purchase additional shares or even fractional shares. This is an excellent choice for small investors because the shares are purchased at a discount without paying a sales commission to a broker. Unlike most mutual funds, ETFs typically feature a passive management structure, which translates to lower ongoing costs.

However, among other drawbacks to ETFs , you must pay fees on their transactions. To lessen these charges, consider using a discount broker that does not charge a commission—or plan to invest less often, perhaps investing larger amounts quarterly rather than making small monthly purchases. Crowdfunders connect investors with money to lend and entrepreneurs trying to fund new ventures. As the loans are repaid, investors receive a share of the interest in proportion to the amount they have invested.

Crowdfunding offers high risk, as many new ventures fail, but also the prospect of higher earnings. With this type of fund, you choose the target date. The investments in the fund are automatically adjusted over time, with the overall mix moving from riskier to safer as your target date gets closer. Why is this important? You can make riskier investments that might earn higher returns. Investing in individual stocks that pay dividends is a smart strategy. You will have the option of receiving the dividends as cash payouts or reinvesting them in additional shares.

Like ETFs, index funds are passively managed, which means a lower expense ratio , which moderates fees. The goal of an index fund is to at least match the performance of the index. It also gives you broad exposure to a number of asset classes. The first is to invest in a real estate investment trust REIT. This is a corporation that owns a group of properties or mortgages that produce a continuous stream of income.

REITs can be traded or nontraded, with the latter carrying much higher upfront fees. Real estate crowdfunding is a second option. Real estate crowdfunding platforms are now permitted to accept investments from both accredited and nonaccredited investors. Investors can also choose between debt and equity investments in commercial and residential properties, depending on the platform. Equity investments can see higher yields if the value of the property increases.

Keep in mind that this type of investment can carry more risks than more traditional investments. The Bottom Line Investing can get complicated , but the basics are simple. Minimize taxes and fees. Make smart choices with your limited resources. That said, building a portfolio can also raise such complexities as to how best to balance the risk of some investments against their potential returns.

Consider getting help. Given the technology and the fierce competition for your investments, more resources than ever are available. Options include roboadvisors , virtual assistants that can help you create a balanced portfolio at a low price, and fee-only financial advisors who do not depend on income from commissions on the products they sell you. The hardest part of investing is getting started, but the sooner you do so, the more you should make.

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Stocks tanked in August, neared record highs in September and Goldman Sachs is predicting a wild ride in October. Financial behaviorist Jacquette Timmons said that uncertainty and the lack of control over the market's performance causes many people to fear investing. Can you trust the professionals Danielle Town author and investor Yet, it's important to remember that the stock market is going to go up and down several times over the course of your lifetime.

Have rules and a system Worried about the uncertainty and lack of control surrounding stocks? Timmons said you need to confront your fears by figuring out what exactly you are afraid of. And then realize that there are ways to gain command of an investment strategy. One of the first things we discuss is how someone can get into investing in real estate this year with all the challenges the current market brings.

Three words: buyers are buying! This was following a tumultuous year, resulting in supply chain issues across the board which affected home construction in high numbers. But Jamil! What about inflation? The world is crazy right now, and prices have risen across the board , which is a huge factor in housing and the broader economy. So if buyers are buying during this time, how do new and seasoned investors combat the challenges and hurdles?

People I know working the landscape are getting deals. Professional eaters have caused the primary buyers to pull the trigger on buying a house. The type of deals that I, as a wholesaler, am going after are distressed properties. In fact, for many folks, the pandemic has made it more necessary to to wholesale their homes.

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But whether or not income investing is the right choice for you depends on your plans. While income investing is an especially useful tool for retirees or soon-to-be retirees, it might not be the best option for a young investor with a long investment timeline ahead of them.

Short selling. This is an undeniably risky strategy. Essentially, short sellers are betting that the price of a stock will fall before they have to pay for the borrowed shares. Usually, a short seller will borrow a stock from an investor who owns the share and try to sell it on the open market.

But it could be the right fit for your risk tolerance. Rebalanced asset allocation. As the market changes, it might be time to revisit your asset allocation. When in a bull market, it could be a smart move to focus on safe-haven assets. These types of assets are expected to help your portfolio maintain its value through a bumpy bear market.

A few popular safe haven assets include precious metals and consumer staple stocks. Take a look at these other safe haven investments to see what works best for your portfolio. Even outside of a bear market, regular rebalancing is a useful way to ensure your portfolio is aligned with your financial goals. Bottom Line A bear market can be a rough ride for investors.

But even if the market is on a downward trend, savvy investors can still implement worthwhile investment strategies. There is not a single investment strategy for a bear market that works best. What about inflation? The world is crazy right now, and prices have risen across the board , which is a huge factor in housing and the broader economy. So if buyers are buying during this time, how do new and seasoned investors combat the challenges and hurdles?

People I know working the landscape are getting deals. Professional eaters have caused the primary buyers to pull the trigger on buying a house. The type of deals that I, as a wholesaler, am going after are distressed properties. In fact, for many folks, the pandemic has made it more necessary to to wholesale their homes.

These are the opportunities and the potential opportunities new and seasoned investors should be going after. Learning the Art of Underwriting The second most important strategy point is to learn how to underwrite. Underwriting means doing your research and learning the value of properties, which will then lead you to understanding the consequences of overpaying and the consequences of getting a good deal. Despite the unexpected surprises that the last few years have brought, there are still opportunities to be found.