Funds that will not be needed to pay expenses or to make near-term purchases can be invested. A good investment will accrue value over time, but in order to take advantage of the opportunity, you must often allow your money to be outside of your direct control for a significant period of time. Otherwise, short-term volatility may erase the benefits of an otherwise sound investment. Different investments will be appropriate for different investors. Your age, amount invested, and reasons for investing will have a significant effect on which types of securities you will choose. Once you understand what the most common investing options are, continue to the section on building a portfolio to learn about putting them to work for your specific financial situation.
For many experts, you can buy small and straightforward or cutting edge and complicated, you can follow the trend or you can go against the trend, you can stay with domestic products or you can go with something different and foreign. Irrelevant of your choice, however, there are certain things that need to be kept in mind. The following five points should be followed before investing your hard earned money in the markets.
•The funds for investing should be money that you saved up for this particular purpose. You should have an emergency fund in case you run into troubles and you should have money to cover bills and any other obligations. You should strongly consider how your life would be affected if you lost 75 percent or even all of this money.
•The time horizon for your investment will affect your investing decisions. If you intend to pull this money out within 5 years in order to buy a new home, then this should be a consideration when investing. If you know you can invest this money for the long haul, then you may be able to handle the volatility of the markets more than someone that has a shorter time frame. Warren Buffett invests with, essentially, no time frame. He has billions of dollars at his disposal and loyal shareholders that will not question his investing decisions. This allows him to invest in companies for very long periods of time and only sell when he feels time is ripe. This type of strategy will differ to the person who has a limited amount of money to invest and is constantly in and out of investments.
3) Past performance does not equal future performance. Before the housing bubble crashed, everyone believed the mantra that real estate was the safest investment and would
