About Investing Money

Keep your investment costs low.

When it comes to saving and investing, the sooner you can get started, the better off you can be. Learning about investing is important for everyone, whether you are just starting your first job or already looking forward to retirement. Becoming an informed investor allows you to be your own financial planner and take control of your own financial future.

Short-Term vs. Long-Term Goals

When investing, separate your money into short-term and long-term. Money you need for the short-term is not investment capital. Instead it is savings capital, and you should use only safe investments like CDs and money markets. You can use stocks and stock mutual funds for longer-term goals like retirement and college savings, provided you do not expect to need the money within the next five years.

Avoid Market Timing

Even experts have trouble timing the market, and in order to profit from market timing you have to be right at both the top and the bottom of the stock market. Instead of trying to time the market, it is better to take a dollar-cost averaging approach. With this approach you simply put the same amount of money into a mutual fund or other account. You continue to accumulate shares month after month, regardless of whether the stock market is up or down. This approach helps you build your portfolio by buying more shares when the market is down, and that can give you more money when the stock market starts back up.

Determine Asset Allocation

Before you invest any money, first determine your ideal mixture of stocks, bonds and fixed-income investments. If you are a young investor and investing for long-term goals, you can afford to tilt more toward stocks and stock mutual funds. But as you get closer to needing that money, you might want to shift more of your holdings to government bonds, certificates of deposit, money market funds and other safe investments.

Keep Your Costs Low

No matter what you invest in, it is critical to keep your costs as low as possible. Investment costs really add up, especially over long periods of time, and even a small uptick in costs can have a huge impact. Before you invest in any mutual fund, you should first read the prospectus carefully and find the expense ratio and other costs. Comparing the costs and the performance among various funds is one of the best ways to control your costs and make the most of your investments.

References

• SEC: Beginner's Guide to Asset Allocation
• SEC: Invest Wisely -- Mutual Funds