Investing Basics – Tips on Budgeting

There are so many different options of what to do with your money. Do you settle for low risk accounts or try to make a fortune on the financial tightrope of high risk investing. The next thing you need to consider is where to put it. The options are but not limited to the stock market, bonds, savings/checking accounts or under your mattress. Lets go through investing basics and other various tips on budgeting.

STOCKS:

The stock market has historically outperformed every single other type of investment. From 1926 to 2008 the average annual gain hovers around 9.5%. One thing to keep in mind is that stocks are usually considered a long term investment, thus the high rate of return. In 1987, stocks experienced a drop of close to 25% in one day, the worst one day total in over 50 years. Naturally, as stocks do, they rebounded and thrived for over a decade. If you have a plan that justifies locking your money away, the stock market is a viable option. If you are sheepish and can’t stomach the thought of losing a large amount of your portfolio then perhaps you should keep looking.

BONDS:

Bonds are a safer bet than stocks and typically outperform most regular savings accounts. Since 1926 bonds have typically returned around 5.9%. Not a bad return. There are two types of bonds you can invest in. Short-term and long-term. Long term usually pays more in interest but again it is a slightly more risky way to invest. The only factor to consider when deciding how to manage money when investing in bonds is the rate of inflation and rising interest rates. Usually when interest rates go up bonds decline. This is because bond buyers won’t pay as much for an existing bond with a fixed interest rate.

REGULAR ACCOUNTS:

This is clearly the safest form of investing and simplest of the tips on budgeting I can offer, but also returns the lowest amount for your invested money. If you plan to save all of your retirement fund in a regular account you may actually end up losing money in the long run because of inflation. When it comes to the investing basics of how to manage money it is important to take some risks from time to time. You must never take a bigger risk than you are comfortable making. The basic key to remember is that the higher the risk the more of a return you will get. The downside is the chance to have losses. This is why it is important to educate yourself as much as you can. Check out more of my blog to receive the free E-Book, free budget spreadsheet, free calculators, all sorts of fantastic tips on budgeting and links to various tools. We also have a few leaked videos to help with your finances.

Happy investing!

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