Make Your Money Work For You

Investing is putting your money to work with the goal of generating more money. If your investing is done with proper planning you can achieve all your financial goals, including buying a home, paying the college costs of your children and ensuring a comfortable retirement for yourself.

You do not need a lot of money for investment; even a small amount invested on regular basis can return handsome rewards over the long term. However, in order to ensure good returns, you need to plan and develop a strategy. Strategizing will help you to get the maximum benefits of investing with limited resources. The following are a few quick investing tips to maximize your productivity.

Start Early

When you start investing at a young age, you are at a huge advantage because you can opt for safe and effective long term investments. Even if you save and invest a small amount every month you will get better returns at retirement. For instance, if you start investing only $100 a month when you are aged 25 and continue to do so till you reach the age of 35, your total contribution for 10 years would be $12,000. At the rate of 8% return (compounded monthly) the approximate value of your $12,000 would be $200,000 when you reach the retirement age of 65. On the flip side, if you begin investing at the age of 35, at $100 per month and continue to contribute the same amount until you are 65 years old, your total contributions would be $36,000. Again, at an interest rate of 8%, the estimated value of your fund at age 65 would be $150,000. It is easy to see how you can guarantee your child’s financial future by starting to invest for them from their childhood years.

Do Your Homework

There are many options available in the market for investing your money. Before you begin investing, research all the options, including mutual funds, stocks, bonds, treasury securities, variable annuities, real estate investment trusts (REITS), commodities, commodity futures, etc. Find out how and when you can get your money back and keep in mind the risk factor. Usually a higher earning potential is accompanied with greater risk.

Diversify Your Investments

If you put your money into diversified investment funds, the risk of low returns or running into losses is minimized. Some investments perform better than others in the same situation, for instance bond prices may drift lower when interest rates go up. When your investments are spread over a number of options, you reduce the impact of market fluctuations and changes in fiscal policy.

Understand Your Investment

It is important to know the type of returns your investment will provide. It may be in the form of dividends, interest or rent. Try to invest in stocks and real estate that have potential growth value over a period of time. Bonds are safer options as they usually guarantee a fixed return. Depending on market situations, investment in other securities may or may not provide high returns. So balance your investments with federal government backed securities like bank savings accounts and U.S. Treasury securities.

Invest In Tax Deferred Instruments

Put in as much money as you can into IRAs or your 401(k), as these allow you to either get tax free withdrawals or make tax free contributions. Apart from these there are U.S. Savings Bonds, which are exempt from local and state taxes. Municipal Bonds are exempt from federal income tax; state income tax may or may not be applicable. Tax deferred investments help you save on taxes now, when you are probably in a higher tax bracket. The tax burden may be minimal or even zero if you withdraw these funds after retirement, when you may be in a lower tax bracket.

Check the Securities and Exchange Commission (SEC) to get more financial information for making informed and sound decisions for your investments. The federal government also offers many investment and savings plans for long and short term goals. Here are a few of them:

• Share savings.

You can invest in this account for making regular monthly savings. The interest rate is good and there is freedom to use your funds as often as you want. It is possible to even open special accounts for buying a new car or making the down payment of your home.

• Share certificate.

This is a federally assured investment plan with investment terms ranging from 3 months to 60 months.

• Money market account.

If you can invest $2,500 per month this plan is the best option as it earns a tiered rate of interest.

• Payday saver certificate.

This is an excellent plan for saving small amounts. You can save even $10 with the flexibility of making additional deposits over time.

Saving and investing in a planned manner is a sure way to achieve your financial goals. All that is needed is the financial discipline to budget your expenses and ensure that you put aside some money regularly towards your contributions in various investment plans.