Mutual Funds Investing 101


These financial tips are designed to help you live your best financial life and take advantage of the fact that the younger you are, the more time your savings and investments have to grow. 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. While paying with a credit card will sound troublesome, you will note that sometimes it is essential.

By contrast, an investor saving up for a teenager’s college education would likely take on less risk because he or she has a shorter time horizon. It is important to put your credit cards away and not use them until you get your finances in order. You’ll be paying a lot more money in interest SMSF Management Software by carrying a credit card balance. Those who are self-employed have a range of options for setting up retirement plans. Others can open their own IRAs, allowing for a set amount of money each month to be withdrawn from their savings account and contributed directly into their IRA.

That means using your budget and the balance in your checking and savings accounts to decide whether you can afford a purchase. Remember that just because the money is there doesn’t mean you can make the purchase. You have also to consider the bills and expenses you’ll have to pay before your next payday.

One type of investment vehicle that can help diversify your money is a mutual fund, which gets money from investors and pools it together into a fund. These funds invest in various securities like stocks, bonds, and short-term debt. Your first step when managing money is to create a spreadsheet on your computer, as it will help you keep track of all of your finances so you’ll be able to see where you are as the months go on. On your spreadsheet, you should have information on your monthly expenditure and any income you receive.

Keep a small business cash reserve to help you manage money when you’re in a pinch. You can start a cash reserve by opening a business savings account. Because it makes you feel like the money you shuttle to your savings every month appears out of thin air—even though you know full well it comes from your paycheck. If the money you allot toward savings never lands in your checking account, you probably won’t miss it—and may even be pleasantly surprised by how much your account grows over time.

There are bond ETFs that hold a diversified portfolio of bonds with varying interest rates and maturity dates. ETFs are available that hold physical gold or silver for investors wishing to invest in precious metals but who prefer to hold ETF shares rather than physical metals. No business owner likes being strapped for cash, but mismanaging cash flow happens. Nearly half (42%) of small business owners report that handling cash flow is challenging.

So choosing an asset allocation model won’t necessarily diversify your portfolio. Whether your portfolio is diversified will depend on how you spread the money in your portfolio among different types of investments. The youth of today is vastly aware of the dreams he/she needs to achieve in life. Be it costly foreign education, cost of marriage, cost of raising children, or planning for own retirement, youngsters have a long road ahead of them with these expenses. The power of compounding shows that commencing with investments early and managing money smartly, has the potential to let the investor reach individual goals easily.

But savvy investors typically do not change their asset allocation based on the relative performance of asset categories – for example, increasing the proportion of stocks in one’s portfolio when the stock market is hot. Now that your credit cards and high interest debt is paid off, the next thing you need to save for is an emergency. This emergency fund will be set aside to protect you in case of a medical emergency, loss of a job, or another catastrophe. The goal of this emergency fund is to help you get back on your feet as quickly as possible. Andy Smith is a Certified Financial Planner (CFP®), licensed realtor and educator with over 35 years of diverse financial management experience. He is an expert on personal finance, corporate finance and real estate and has assisted thousands of clients in meeting their financial goals over his career.

Todd is the founder of Invested Wallet and has been featured in Yahoo Finance, Business Insider, HuffPost, and many others. He is self-educated on personal finance and investing, having become debt-free and on a path to financial freedom. He’s passionate about investing, saving money, making money, and helping others realize they can transform their finances on their own. For example, let’s say you determined that stock investments should represent 60% of your portfolio. But after a recent stock market increase, stock investments represent 80% of your portfolio. You’ll need to either sell some of your stock investments or purchase investments from an under-weighted asset category in order to reestablish your original asset allocation mix.