About Investing

The process of getting started with investing can be a bit daunting for someone who has never invested a dime. But you can get started with ease by following this simple plan.

1. Join your company's 401K program. Many companies offer a 401K program, which is a retirement savings program. They may even make a "matching contribution" up to a certain percent. This means that for every dollar that you put into this savings account, they will add a certain amount of money. This is free money for you. The money that goes into your 401k account will be pre-tax money. Usually, your human resources department makes it very easy for you to invest in a 401k. You simply have to sign up and choose your fund based on your preferences. Make sure that you do research the options that your company has. You want to make sure that you choose an investment that is good for you. It's an important decision and you shouldn't make it just by following what the person in the next cube does.
2. Start an IRA, either traditional or Roth. IRA stands for Individual Retirement Account. This is another type of retirement savings account. They are easy to set up.
3. Set up automatic savings. Many savings accounts can be set up to automatically withdraw money from your checking account and put it into your savings account. It's best to set it up to do this the day that you get paid. Some employers may also be able to help you out with this by depositing a certain percentage of your salary into your savings account. This will help you to set up an emergency fund. You will use this money whenever you have sudden unexpected expenses.
4. Reduce your debt. As you are doing this, you will want to work hard to reduce your debt. The less debt you have, the more money you will have to put into your savings and other investment accounts.
5. Look into additional investment options. Once your emergency fund has enough money to support you for 6-12 months in case you lose your job or have an accident, it's time to look into other investment options. Many people consider opening an additional brokerage account and investing in the stock market. You can do this online.

Once you have all of these steps down, it is just a matter of being consistant and continuing to add to your investments.

Many new investors may have heard the terms "bear market" and "bull market" but find that they don't really understand what they mean.

What is a "bear market"?
A bear market is an extended period of time where stock prices are falling. The general feeling among investors is pessimistic and so people begin to sell their stocks as fast as they can. Because there are more sellers than buyers, the prices of stocks go down.

This should not be confused with a correction in the market. A correction occurs when stock prices have been inflated and these prices finally drop to reflect what the stocks are actually worth. This generally lasts for a short time while a true bear market is over an extended period of time.

What is a "bull market"?
A bull market is a period where stock prices are rising. The general feeling among investors is optimistic and people are trying to buy as many stocks as they can because they believe that stock prices will continue to go out. They want to buy their stocks at the lowest possible price. There are more buyers than sellers in a bull market, which helps to increase the prices.

Where do the names come from?
There is much debate as to the origin of these terms, however the most widely accepted deals with the way that each of these two animals attack. A bear will attack by moving its claws in a downward motion while a bull attacks by using its horns in an upward motion.

What are some investment strategies for each of these markets?
The ideal situation is of course to "buy low and sell high". So, in essence, you'd want to sell your stock just before the price starts to drop (in a bull market) and buy your stocks just before the price starts to rise (in a bear market). Of course, stock prices are constantly fluctuating and it's impossible to tell at which point a stock has reached its highest or lowest prices.

Realistically, you want to make sure that you are investing for the long term. When you do this, you are not so easily affective by general market trends because the gains and losses will average out over time. You can also reduce your risk by diversifying your investments. You can diversify by investing across a wide range of industries and companies. This way, if one industry sees a bit of a drop, your entire portfolio is not affected.

If your portfolio is diversified and you are investing for the long term, then you shouldn't need to worry too much about the fluctuations of a bull or bear market.

Bonds are generally thought to be a "safe" investment and are one of the options that you can use to diversify your portfolio. But what exactly are bonds and are bonds a good investment for you?

In a way, bonds are similar to giving a loan to the government or a company. After a specified amount of time, they will pay your money back along with the interest.

In most cases, the term of a bond is fixed. That means that you cannot retrieve your money until the term is up. The term is usually quite long%u20265 years or more. The longer the term, the higher the interest rate that you can get. Bonds are considered one of the most low-risk types of investments because there is very little chance of the government or corporation defaulting on the loan. However, the rate of return is quite low compared to other investment options.

If you have many years before your retirement, you can afford to take a lot of risk with your investments. When you don't need the money right away, then it doesn't matter so much if the investment loses money in the short term. The chance for greater return in the long run is worth it. However, many people who are approaching retirement age choose to shift a higher percentage of their investments into bonds.

A financial advisor can help you to plan the best way to invest your money according to your personal financial goals. Even if you are close to retirement, you may be able to afford more risk in your portfolio. Many people play it too safe.

These days, many internet savings accounts have interest rates which are near the same as the rates that are offered with bonds without the money being tied up. Anyone who needs to make sure that they keep their initial investment will do well to look into these offers.