Basic Principles of Investing

Introduction

There are so many ways in which to invest your money: CDs, stocks, bonds, mutual funds, real estate... Even pork belly futures and gold coins are investments. And there are so many places to put your money: 401(k)s, IRAs, annuities, brokerage accounts, credit unions, and banks. What's right for you?

Well, there's a good financial planning answer to that question: It depends.

There are four main things you need to think about before you can decide how to invest your money:

  1. Liquidity Needs. How much money do you need to set aside for emergencies and other short-term goals?
  2. Goals & Objectives. What are you trying to accomplish? Do you want to retire early, send the kids through college, buy a house, or simply put some money away for a rainy day?
  3. Time Horizon. How long will it be until you need your money?
  4. Risk Profile. How much market risk can you tolerate?
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