Despite the tough economy, now is a great time to invest with stocks low and most people selling rather than buying. The best way to invest money, however, can be tricky to determine and it depends on a lot of personal factors and where you are in your life. This article will analyze some potential situations and help you figure out your best investment method.
Risky investments typically pay more than safer investments so young investors are very lucky because they can afford to take on extra risk. Should the investment go bad and the investor loses their shirt, they will have time to make up the income before they retire, typically 30 or more years later. Investing early can mean big returns come retirement.
Older investors cannot afford to be risky with their investments as they are close to, or getting close to, retirement. Older investors need to avoid risky investments like stocks because their volatility can cause them to lose a significant portion of their savings, especially if they are cashed in like a downswing that we are currently experiencing. Look for more secure investments like bonds and treasury securities as options.
Another factor you need to consider is the amount of money you make in a year, and how much you rely on for everyday living expenses. If you are heavily reliant on your day to day income, then you really should consider more secure investments, as you will have a more difficult time making up those losses in the future, whereas an investor that makes more money can afford to be risky because they would have an easier time making up big losses.
The last thing you want to consider is the amount of debt that you have currently. If your credit card interest rate is higher than a potential return on investment from stocks, you need to pay down the debt first. In most cases credit card rates are much higher than you will earn in this economy.
Risky investments typically pay more than safer investments so young investors are very lucky because they can afford to take on extra risk. Should the investment go bad and the investor loses their shirt, they will have time to make up the income before they retire, typically 30 or more years later. Investing early can mean big returns come retirement.
Older investors cannot afford to be risky with their investments as they are close to, or getting close to, retirement. Older investors need to avoid risky investments like stocks because their volatility can cause them to lose a significant portion of their savings, especially if they are cashed in like a downswing that we are currently experiencing. Look for more secure investments like bonds and treasury securities as options.
Another factor you need to consider is the amount of money you make in a year, and how much you rely on for everyday living expenses. If you are heavily reliant on your day to day income, then you really should consider more secure investments, as you will have a more difficult time making up those losses in the future, whereas an investor that makes more money can afford to be risky because they would have an easier time making up big losses.
The last thing you want to consider is the amount of debt that you have currently. If your credit card interest rate is higher than a potential return on investment from stocks, you need to pay down the debt first. In most cases credit card rates are much higher than you will earn in this economy.
About the Author:
Charles Johnson is an author for PE Financial Services and their personal finance website. Visit us for information about investments, insurance, loans and the best way to invest money in this tough economy.
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