Investment Articles

Wondering how to invest and where to invest money in mutual funds in 2012 and going forward without paying heavy sales charges, expenses, and fees? Here we spell it out for you so you can put your money to work and invest with confidence.

How much does it cost to invest $10,000 in a typical stock fund? This depends on where you invest your money. In a fund company that charges a 5% load (sales charge) it could cost you $500 up front just to invest your money. Then it could cost $200 a year for fund expenses, increasing as the value of your account grows. For a $100,000 rollover from your 401k you could be looking at $5000 off the top and $2000 a year plus perhaps $1500 a year in management fees for your “advisor” who handles your account. These are examples of how not to invest in 2012 and beyond.

The secret to how to invest money in funds is to put all of your money to work by avoiding sales charges called “loads. The secret to where to invest is to go with a fund company that offers funds that have no sales charges or extra fees; and also has low expenses. The one thing you can control is your cost of investing. The lower your cost the higher your net returns.

Here’s how to invest and really put your money to work in stock funds and bond funds: go with NO-LOAD INDEX FUNDS. Here’s where to invest: with Vanguard or Fidelity, the two biggest fund companies in America. How much will a $10,000 stock fund investment cost you vs. our first example? Zero for sales charges and maybe $25 to $50 per year for expenses. For a $100,000 rollover you could save $5000 up front plus $1750 a year in expenses plus $1500 a year for extra management fees!

Just search for NO-LOAD FUNDS on the internet and you will see names like Fidelity, Vanguard, and T Row Price. If you are not quite sure how to invest with them give them a call. Don’t be afraid to ask questions. All fund companies want you to invest your money with them. That’s how they make a living.

Investing money in 2012 and beyond could get tricky. You can not predict the markets, but you can control your cost of investing if you know where to invest and how to invest to get your money’s worth.

Author James Leitz teaches investment basics, stocks, bonds, mutual funds and how to invest in his investing guide for beginners called INVEST INFORMED. Put Jim’s 40 years of investing experience to work for you and get up to speed at http://www.investinformed.com. Learn how to invest.

Here we list some of the best investment ideas and tackle the challenge of finding the best safe investments for 2012. What might appear to be one of the best investment ideas to the uninformed could turn out to be one of the worst.

Looking at the big picture for investment ideas in 2012, moderation in asset allocation and a balanced investment portfolio will be the most basic key to success. There are 4 asset classes, and average investors need to spread their money across at least the first three to keep their overall portfolio risk moderate. The 4 categories in asset allocation are: safe investments, bonds, stocks and alternative investments like gold and real estate (optional). Asset allocation can be simplified, because there are mutual funds available to average investors that represent each of the 4 asset classes. Now let’s get more specific about the best investment ideas for 2012 starting with safe investments.

Safe investments earn interest and do not fluctuate in price. You will need to look outside of mutual funds in 2012 to find the best safe investments because record low interest rates have taken yields on money market securities (and hence money market funds) down to just about zero. One of the best investment ideas if you have an account with a discount broker or major mutual fund company is to shop for one-year CDs paying higher rates if you can’t get competitive rates from your local bank. Do not tie your money up for longer periods just to earn a little more interest. One of these days interest rates will go back up and you will be locked in at a lower rate and face penalty charges if you cash in early.

Finding the best safe investments will be truly challenging in 2012, but here are some more investment ideas. If you are in a retirement plan like a 401k that has a fixed or stable account option do not overlook it. You can often get a much higher interest rate there (maybe 4% to 5%) than anywhere else outside of your retirement plan. If you own an older retirement annuity or universal life insurance policy, it might have a fixed account you can add money to that is guaranteed to never pay less than 3% or 4%. Remember, truly safe investments like U.S. Treasury bills and bank money market and savings accounts are paying WAY LESS than 1%!

Over the past 30 years bonds and bond funds have become a favorite with investors because they have been consistent performers and returned on average about 10% per year… basically about equal to what stocks have returned, but with considerably less risk. Many investors have fallen in love with their bonds funds and consider them to be among the world’s best safe investments. Bond funds are NOT safe investments. They have performed well since 1981 (when interest rates and inflation were at record highs) for one primary reason. Both inflation and interest rates have been falling for 30 years, which has sent bond prices higher. Loading up on bond funds now is NOT one of the best investment ideas for 2012. In fact, it is one of the worst investment ideas.

When interest rates and/or inflation turn around and head upward bond funds, especially those that hold long-term bond issues, will be losers. That’s how bonds work. One of the very best investment ideas for 2012 is to sell your long-term bond funds if you own any, and switch to funds holding bonds with average maturities of about five years. These are called intermediate-term bond funds; and average investors should have some money invested here as part of their asset allocation strategy to add balance to their investment portfolio. These are not truly safe investments, but they are much safer than long-term funds.

My best investment ideas in the stock department focus on stock funds. Do not go heavily into the more aggressive funds that invest primarily in growth and/or small company stocks. These pay little if anything in dividend income and tend to be more risky and volatile than the average stock fund. Go with funds that invest in high quality large-company stocks with excellent dividend paying histories. Look for funds that are paying 2% or more in dividends. One of the best investment ideas for 2012 and beyond: invest in no-load funds with low yearly expenses. No-load means no sales charges, and low expenses mean higher net returns to the investor.

Alternative investments include the likes of real estate, gold and other precious metals, natural resources, commodities, foreign investments and so on. One of the best investment ideas for managing a truly balanced investment portfolio is to include this fourth asset class as well. The simplest way for the average investor to add these alternatives to their portfolio is with mutual funds that specialize in these areas or sectors. My best investment ideas here: don’t go heavily into any one area, and don’t chase after a sector (like gold) just because it’s hot. Real estate and natural resources funds would be my picks as two of the best investment ideas in the alternative investments asset class.

Moderation and diversification across the asset classes will be the key to asset allocation in 2012. I have also listed some specific best investment ideas for keeping the average investor in the game and out of serious trouble should the investment scene turn ugly. Above all else memorize this: long-term bond funds are not among the best safe investments for 2012. They are not safe investments, period.

Author James Leitz teaches investment basics, stocks, bonds, mutual funds and how to invest in his investing guide for beginners called INVEST INFORMED. Put Jim’s 40 years of investing experience to work for you and get up to speed at http://www.investinformed.com. Learn how to invest.

The best investment strategy for 2012 and beyond will differ from the popular investment strategy offered by most investment advisers and financial planners today. The investment landscape has changed. Here’s a strategy for making the best of it.

Up until recent times you could stay out of serious trouble by simply allocating about half of your investment assets to stocks and the other half to bonds. That’s the traditional investment strategy often recommended for average investors, and most people deal with it by putting their money in stock funds and bond funds. Stock funds are the growth half of the equation and the risky part of the strategy. Bond funds are considered the relatively safe investment designed to pay higher interest income. Over the years losses in one fund type were usually offset by good returns in the other.

Welcome to the year 2012, where bonds and bond funds will likely not be such a safe investment. Stock funds are never safe and 2012 will be no exception to the rule. Asset allocation will be only half of the story going forward. Selecting the right funds within each category will be the other key to success. Let’s look at your best investment strategy in both fund categories, and the reason why certain funds will be your best choices.

Two things stand out about the so-called recovery the USA has supposedly experienced over the past few years. First, the economy did not recover as it has in the past after a recession – 9% of the working force is out of work. This makes for a weak economy and puts pressure on the stock market and stock funds. That’s why you’ll need to be careful about which stock funds you include in your investment portfolio.

Second, interest rates have been driven down to historically low levels to stimulate the economy in general and the pathetic housing market. Even with a 4% mortgage rate average folks can not qualify for a mortgage or afford to buy a house. Today’s ridiculously low interest rates mean savers can not earn a respectable interest income in truly safe investments. It also means that bond funds could be a trap in 2012 for people who don’t really understand bonds and bond funds. Let’s look at the best bond fund strategy first.

Even the best bond funds of the past few years could be big losers in 2012… if they hold long term bonds in their investment portfolios. When interest rates turn around and go back up the bonds they hold will lose significant value because new bonds will become available that pay more attractive (higher) interest income. Your best investment strategy for bond funds is to own funds that hold corporate bonds that mature in about 5 years to 7 years. CORPORATE BOND FUNDS pay more interest income than similar funds that invest primarily in government bonds. Funds that hold bonds maturing in 5 to 7 years (intermediate term bond funds) will be much less affected by rising interest rates than long term funds holding bonds that mature in 20 years or more. That’s a fact, and that’s how bonds work.

Your best investment strategy for stock funds will be to go with GROWTH AND INCOME funds that invest in high quality companies with a history of paying 2% or more per year in dividend income. If the stock market gets truly ugly in 2012 and beyond these funds will be your best bet to sidestep huge losses. In a bad stock market funds that pay little or nothing in dividends are usually the big losers.

Sometimes it pays to be aggressive and take on more risk. The year 2012 looks like a time to get more conservative and live to be a risk taker another day. Most investors need to hold stock funds and bond funds as well as truly safe investments like bank CDs. Your best investment strategy for 2012: allocate your investment assets with 40% going to INTERMEDIATE TERM CORPORATE BOND FUNDS and the same going to high quality GROWTH AND INCOME STOCK FUNDS paying 2% or more in dividend income. The other 20% of your investment portfolio goes to safe investments like bank CDs.

Author James Leitz teaches investment basics, stocks, bonds, mutual funds and how to invest in his investing guide for beginners called INVEST INFORMED. Put Jim’s 40 years of investing experience to work for you and get up to speed at http://www.investinformed.com. Learn how to invest.

The best time to plan your best investment strategy and pick the best funds for 2012 is now, because last year’s investment strategy and best funds could put you in the poor house by year end 2012. There’s a rocky road ahead for stocks and bonds, and you’ll need a new strategy and the right funds to keep your investment portfolio balanced and out of serious trouble.

For the average investor the best investment strategy will still revolve around bond funds and stock funds in 2012, but the focus will change. The best bond funds will be more defensive, and the best stock funds will be more conservative and income oriented. The USA and much of the free world is facing heavy debt problems on the one hand and slow economic growth one the other. Defense is the name of the game going forward. If you can sidestep heavy losses now and throughout 2012: you will be in a position to step up to the plate when the dust finally settles.

The best bond fund investment strategy is to hold SHORTER-TERM high quality CORPORATE bond funds – and NOT long-term funds that invest primarily in government securities. If interest rates take off long term bonds will fall substantially in value. A mutual fund holding issues that mature in about 5 years will be hurt much less than one that holds long term maturities of 20+ years. That’s not a guess. That’s how the bond market reacts to rising interest rates. I suggest going with corporate vs. government bond funds for two reasons. First, corporate bond issues pay higher interest than U.S. Treasury notes and bonds. Second, corporate America is in excellent financial shape vs. the U.S. government.

The best investment strategy in the stock department is to avoid or sell equity (stock) funds that invest heavily in growth and/or small-company stocks. These often pay little or no dividend income to investors, and in a volatile and declining stock market these funds can get clobbered. The best stock funds for 2012 will be EQIUTY INCOME large-cap funds that invest in high-quality major corporations with excellent records for paying above average dividend yields. A 2% to 3% dividend income might not make you rich, but a steady reliable income stream from America’s highest quality companies tends to cushion portfolio losses in a bad stock market.

Over the past several years I have included owning gold, gold stocks and gold funds as part of my recommended best investment strategy. For 2012 I no longer include gold in my investment strategy, primarily because gold’s price has become extremely inflated over the past few years. Gold has become more of a speculation than a hedge against inflation or disaster. Instead of holding gold I would suggest putting some of your investment dollars in an insured account at your local bank. Sometimes cash is king, especially when interest rates are extremely low and rising. Money market funds are the best funds for safety. When rates move up they should become quite attractive as a safe haven for investors.

Both the best stock funds and best bond funds for 2012 will be defensive in nature. They will also have something else in common… a low cost of investing. Keeping costs low is always an ingredient in the best investment strategy for average investors. Invest in low-cost no-load INDEX funds whenever possible to automatically increase your total returns by 1%, 2% or more year in and year out. That might not sound like much, unless you consider that you haven’t been able to earn 2% in safe liquid investments for the past few years.

In summary, your best investment strategy for 2012 and going forward: an even split between relatively short-term corporate bond funds and high quality large-cap equity- income funds. The best bond funds and best stock funds in these categories will be low cost no-load (no sales charges) INDEX funds with low yearly expense ratios. The best safe investments may be found by shopping local banks or credit unions until interest rates really take off. After that the best safe investment will likely be money market mutual funds.

Author James Leitz teaches investment basics, stocks, bonds, mutual funds and how to invest in his investing guide for beginners called INVEST INFORMED. Put Jim’s 40 years of investing experience to work for you and get up to speed at http://www.investinformed.com. Learn how to invest.

Jack and Mike were at a party in 2011 and the chatter was about investing money and where to invest it. Jack whined about interest rates, and Mike agreed that investing money in the bank was a lost cause. Assuming they both preferred relatively safe investments, a stranger overhearing this suggested they invest in safe mutual funds.

Investing money in mutual funds was on Mike’s list of where not to invest because he had lost a bundle in stock funds during the financial crisis. Jack wasn’t too fond of funds either, since his safe mutual funds (money market funds) were paying MUCH less than 1% in interest. Both felt clueless and uncomfortable as the stranger rattled on about a type of fund. According to mister know-it-all, you could invest in a relatively low risk fund, earn higher returns than at the bank… and just relax.

As they walked away from their new acquaintance Mike suggested that Jack ask his brother Jim (who knew about this stuff) what the devil the guy was talking about. Jim, as usual, had an answer. Can you invest in one single relatively safe fund in 2011 and have exposure to stocks, bonds and safe investments all in one package with relatively low risk at relatively low cost? Can investing money in 2011 and into the future be that simple? Yes it can, in a NO-LOAD balanced fund called a Retirement Income Fund.

Here’s how investing money in these balanced funds works. Let’s say you invest $10,000 in a retirement income fund with a major no-load fund company like Vanguard or Fidelity, the two largest fund companies in America. It should cost you nothing for sales charges when you invest and about $100 a year (or less) for management and other fund expenses. This money will automatically be deducted from the value of the fund shares you own. No-load means no sales charges when you invest or cash in shares.

Now, where is your money actually invested in these relatively safe mutual funds? About 20% will be invested in a variety of stock funds managed by the fund company. This provides you with some growth potential plus dividend income. The rest of your money will be split about evenly between bond funds and safer short-term funds managed by the company, both of which earn interest. The dividend and interest income earned are normally automatically reinvested for you – to buy more shares in the retirement income fund that you own shares in.

Investing money always involves risk and the value of your shares will fluctuate. The good news is that when you invest in a retirement income fund risk is relatively low, and you will own a small part of a large well diversified portfolio. No one knows what the future will bring in 2011, 2012 and beyond. Broad diversification in relatively safe mutual funds makes good sense for most people.

If you feel clueless and are safety conscious like Jack and Mike, consider investing money in a retirement income fund. Let the professional money managers do the managing while you relax in 2011 and beyond. You won’t get ahead with all of your money in the bank, so start investing with relatively safe mutual funds.

Author James Leitz teaches investment basics, stocks, bonds, mutual funds and how to invest in his investing guide for beginners called INVEST INFORMED. Put Jim’s 40 years of investing experience to work for you and get up to speed at http://www.investinformed.com. Learn how to invest.

Even though investing money always involves risk, you need to start investing soon if you want to get ahead. Investing in 2011 and 2012 won’t be a cake walk, but there’s no better time to start putting your money to work then NOW. Money in the bank won’t keep you ahead of inflation and taxes, so here’s how to start investing with less risk and worry.

If you have never ventured into the game of investing money on your own it can be intimidating. It’s tough to take that first step and start investing when people in general view the future with pessimism – think 2011, 2012. It’s better to start with a conservative strategy than not to start at all, so let’s look at the safest way to get started. First, you’ve got to get your feet wet and open an account by depositing money. Here’s how and where to do that, and how to progress from there.

For the vast majority of people mutual fund companies are the best place to start investing money, and the best place to stay. Get on the internet and search “no-load funds” and you’ll see ads by Vanguard, Fidelity and T Rowe price: some of the biggest, best and most affordable fund companies in America. No load means that you pay no sales charges, so this, coupled with the lower total fees and expenses they offer can save you thousands of dollars over the years. Get familiar with what they offer, and then give the company of your choice a toll-free call if you need help opening an account.

Start investing by putting your initial investment into the safest fund they have, which will be called a Money Market Fund. Here you will earn interest in the form of dividends that will be automatically reinvested for you in more shares. You will earn very little interest in 2011 and 2012 because interest rates are near all-time lows (like they are at your bank). But your money is safe and you’ve taken the first step. Now, you’re ready for step number two, which means you will move some of your money and start investing in a fund where you can put your money to work in stocks and bonds. This is easy to do, and you can always call the fund company for help, free of charge.

What you are looking for is a balanced fund – one that invests in stocks, bonds and some safer investments as well. Search for or ask about a fund with a CONSERVATIVE ASSET ALLOCATION, because you are ready to start investing money, but you want to start with relatively low risk. For example, a Target Retirement 2000 or 2010 fund would have you invested in a portfolio consisting mostly of bonds and safer investments with a smaller amount in stocks. Actually, in such a fund you are really investing money in several different funds offered by the fund company, all in one investment package.

Once you’ve got your feet wet and get used to investing money vs. just putting it in the bank, you might want to add a balanced fund with a MODERATE asset allocation to your list of holdings. Here your mix of stocks and bonds should be about equal parts each, and risk as well as profit potential will be higher. If stocks start looking cheap later in 2011, 2012 or beyond, consider investing money in a more aggressive balanced fund like a Target retirement 2030 fund, where most of your money will be invested in a variety of stock funds.

The years 2011 and 2012 might not look like the best time to start investing money, but NOW has never been an easy time to invest (as I’ve learned in the 40 years I’ve been helping people invest money ). Don’t procrastinate like most people do. Start investing conservatively and expand your wings as you gain confidence. Balanced mutual funds are a great place to start and minimize worry.

Author James Leitz teaches investment basics, stocks, bonds, mutual funds and how to invest in his investing guide for beginners called INVEST INFORMED. Put Jim’s 40 years of investing experience to work for you and get up to speed at http://www.investinformed.com. Learn how to invest.

You can learn where to invest and how to invest your money and start investing money successfully as a beginner in 2011, 2012 with just a little guidance. Here we keep it as simple as it gets, to get you up and running in the right direction. With just a little effort up front you should be ready to start investing in a few weeks.

The key to successful investing and keeping risk under control is diversification. That’s rule #1 for investing beginners. You’ll want to invest money in the money market in order to have a safe investment that pays interest. Bonds are the investment of choice to earn higher interest with moderate risk, while stocks are where to invest for higher returns with more risk. Put together an investment portfolio with all three represented and you’ve got a portfolio that is both diversified and balanced. This is how successful investors keep risk at acceptable levels while earning higher returns over the long term.

The good news in investing for beginners is that in 2011, 2012 and beyond you won’t need to pick your own stocks, bonds or money market securities. Some of the biggest and best mutual fund companies will do all of the management for you at a total cost of about 1% a year for management and other expenses, with no sales charges. They offer balanced funds called TARGET funds and these come in several versions from low risk to high. When you invest money in a target fund your money is spread across all of the areas mentioned above.

The answer to where to invest: open a mutual fund account with a major no-load (no sales charges) fund family like Vanguard, Fidelity or T Rowe Price. You can find them on the internet. How to invest your money requires a two part answer. First, work directly with the fund company to avoid extra fees, charges and expenses. Second, spend some time on their websites getting familiar with their BALANCED or target funds. Now, let’s talk about how to identify these funds and how to determine which is right for you.

From safest to riskiest, you should be able to find a list of target funds that looks something like this: retirement income fund, target 2000, 2010, 2015, 2020 and up to 2040 or maybe 2050. These numbers refer to the year you retired, or the approximate year you target as your future retirement date. For example, if you invest money in the safest fund (retirement income) most of your money will be invested in safer investments like money market and bond funds. The reason for this is that when you are retired, or are close to it, relative safety becomes more important.

If you are younger and are willing to accept considerable risk for higher profit potential, investing money in a 2040 target fund (or higher) could be appropriate. Here the lion’s share of your money will be invested in stock funds. When you are deciding which target fund to select, think about your risk tolerance as well as your age and retirement date. If you want a good balance between stocks and bonds with average risk go with a 2020 fund. Or, you might want to invest money in both a 2010 and a 2030 target fund. Then, pay attention to how each performs over time, and how comfortable you feel with each. If you are not comfortable with a fund, move your money to one that better suits your comfort level for risk.

When you invest money in a target fund the fund company automatically adjusts risk downward over time to account for the fact that you are getting older, and likely want less risk when retired. For example, a 2020 fund will eventually resemble a retirement income fund in 10 to 20 years. You simply pick your fund(s), invest money, and watch your quarterly statements. The fund company automatically deducts your cost of investing from the fund to cover management costs and expenses. Investing money in target funds makes investing for beginners as simple as possible for 2011, 2012 and beyond.

You can keep costs to a minimum with a little time and effort and save thousands of dollars over the years. Or you can pay someone else to pick your funds for you and pay for the service. Either way, make sure that the investment matches your risk profile BEFORE you invest money. The simplest form of investing for beginners in 2011 and beyond: balanced funds called target retirement funds.

Author James Leitz teaches investment basics, stocks, bonds, mutual funds and how to invest in his investing guide for beginners called INVEST INFORMED. Put Jim’s 40 years of investing experience to work for you and get up to speed at http://www.investinformed.com. Learn how to invest.

If you are an average investor and want to invest money in an alternative investment like gold, silver or real estate don’t invest until you know the best investment form to invest in. Where you invest is crucial in 2011, 2012 and beyond because these alternative investments have become volatile. If the markets go against you you’ll want to be able to liquidate your investment quickly and easily.

A few years ago investing money in real estate, precious metals or other commodities was out of the question for most folks. These are called alternative investments, and there were two roadblocks if the average person wanted to invest money there. First, it was complicated and risky to play the commodities markets (and still is). Second, liquidity can be a major issue if you take ownership in the physical form. Have you ever tried to sell a property or silver coins in a hurry? Simply put, it can’t be done at a fair price. That’s called poor liquidity.

In 2011, 2012 and beyond you can invest money in these areas with excellent liquidity and simplicity. Your best investment alternative: exchange traded funds (ETFs). Let me use silver in 2011 as an example. If you held silver coins (rounds) going into 2009 or 2010, you watched prices soar through early 2011. It was probably the best investment around until May of 2011. As silver approached $50 an ounce it got hit hard and the price fell fast. If you wanted to take profits (liquidate) on your silver coins there was no quick and easy way to do it, so you probably did nothing.

Nobody knows where to invest money at all times to earn the best returns in terms of precious metals vs. stocks and bonds vs. real estate. But there is a best way for average investors to go about investing money in all of the above. In our silver example, an exchange traded fund with stock symbol (SLV) was probably your best investment. It is a fund that tracks the price of silver and trades as a stock. If you want to buy or sell you can do it any time (at market price) the stock market is open… on the internet… for a commission of about $10. That’s called liquidity, and all you need is an account with a major discount broker to play the game.

With exchange traded funds you can trade the markets, or you can invest money for the long term by putting together your own best investment portfolio that is both diversified and balanced. These funds offer average investors a broad spectrum of choices for 2011, 2012 and beyond. You are missing out on opportunity if you are only investing money in stock funds and bond funds. Put some alternative investments in your portfolio as well. The answer to where to invest in them: exchange traded funds.

Author James Leitz teaches investment basics, stocks, bonds, mutual funds and how to invest in his investing guide for beginners called INVEST INFORMED. Put Jim’s 40 years of investing experience to work for you and get up to speed at http://www.investinformed.com. Learn how to invest.

Whether investing money to the tune of $1000, $10,000 or much more, there are basic investing mistakes that most beginners make. These mistakes can be very costly, so let’s look at investing $10,000 and how beginners can do things right.

When investing money, beginners must realize that there is no such thing as a perfect investment. You can’t have it all in any one single investment. If you are investing $10,000 you must have your own personal financial objectives in mind. What are your priorities from this list: high liquidity, safety, growth, higher income, tax advantages? Be honest with yourself and your financial planner if you have one. Investing money is all about tradeoffs, and what level of risk you are willing to accept.

Of all the investing mistakes beginners make, not knowing and sticking with your financial objectives is the worst. If you are investing $10,000, do you need instant access to your money (high liquidity) in case you have a financial emergency? If so you need a safe investment like a money market fund; and you give up growth, higher income and tax advantages. Otherwise you could be faced with fees and penalties, or market losses if you need to cash in at the wrong time. For example, you don’t want to be forced to liquidate a $10,000 stock investment that’s fallen to $5000 just to make your mortgage payments.

Once you have your objectives in mind get a handle on the investment options that fit your needs before you start investing money. For example, if you are working for a living and investing for retirement, you need at tax break and should consider an IRA or your 401k plan at work if you have access to one. If you are investing $10,000 a year you might want to put half in such a plan and the other half someplace you can get to it without penalties. Lack of liquidity one of the most common investing mistakes beginners make.

Avoid excessive costs and fees. Investing money in stock funds and bond funds to get growth and income not need cost you an arm and a leg. Investing $10,000 in the wrong mutual funds could cost you $500 off the top when you invest and as much as $200 or more EACH YEAR for expenses and other fees. This is one of those investing mistakes beginners make that can be costly over time. For example, people invest in bonds to earn higher income, and over the long term bonds and bond funds have returned about 6% a year. You can’t afford to give a third or half of that back in charges and fees. Go with no-load index funds. There are no sales charges to invest, and investing $10,000 can cost less than $50 a year, period.

Investing money successfully need not be a part time job, but it does require a little ongoing effort on the investor’s part. Ignoring the status of their investments is a common investing mistake beginners and many other investors make. Look at your quarterly statements when you get them. Are there charges and fees you don’t understand… are you losing money? You can not correct a problem if you don’t know it exists.

You can avoid the common investing mistakes beginners make and put yourself in a better financial position. Know your financial objectives and get a handle on your investment options. Keep your cost of investing low and stay on top of your investments. Once you have cash reserves set aside for liquidity, you can start investing money one step ahead of the crowd.

Author James Leitz teaches investment basics, stocks, bonds, mutual funds and how to invest in his investing guide for beginners called INVEST INFORMED. Put Jim’s 40 years of investing experience to work for you and get up to speed at http://www.investinformed.com. Learn how to invest.

Investing money in 2011 and 2012 puts the investor between a rock and a hard place as investing has become more difficult. Investing in stocks has gained favor vs. bonds in recent months. What’s going on, how should you invest, and why do I say investing has become difficult?

The stock market just about doubled in value between early 2009 and early 2011, and investing money in stocks (equities) and selling bonds appeared to be the new trend in investing for 2011. Does this mean that investors are confident that the U.S. economy is well and getting better? Not necessarily. More than likely it means that investing in equities appears to be the lesser of two evils. Bonds and bond funds have a cloud hanging over their head. Interest rates could start rising significantly in 2011 or in 2012 and this spells trouble for anyone investing in bonds.

There are very few statements you can make in the world of investing money that are universally accepted as fact. One of them is this: when interest rates go up, bond prices (values) go down. In simple terms, the fixed interest payments that these securities pay become less attractive to investors as rates go up. So, many investors will sell their bonds… sending prices down… and put their money someplace else. Since the government had been holding interest rates down for months to stimulate the economy, rates are likely to go up in 2011 or 2012, if the government stops this policy as planned. Investing money in bonds will then be a loosing proposition if rates rise significantly. That’s a fact and about as black and white as investing gets.

Stock investing is more of a gray area. High and rising interest rates can slash corporate profits and this tends to send stock prices down. But in early 2011 rates might have been rising, but they certainly were not high by historical standards. Corporate profits were strong and investors dumped bonds and switched to stocks. The other major alternative for investing money was safe investments like one-year CDs and money market funds. With both of them paying less than 1% a year, there was little reason for the average investor to invest in either. The only real advantage in safe investments at these low interest rates is safety and liquidity.

In other words, none of the three basic investment areas where most people invest look very attractive. That’s what makes investing money in 2011 and going forward difficult. If interest rates continue to climb bonds are guaranteed losers and stocks will eventually get hit. Safe investments might not look attractive when they start paying at 1% or 2%, but they will at 3%, and that’s where folks will put there money.

So, how should most people invest money for 2011-2012? Cut your exposure to bonds and avoid long-term bonds and funds that invest in them. Long-term bonds and funds will get hurt the most if rates rise significantly. Go with intermediate or shorter term bond funds. Move some money into money market funds. They are safe and the interest they earn will automatically go up with rising interest rates. Investing money in stocks or equity funds should remain a part of your overall strategy, but avoid aggressive growth issues or growth funds that don’t pay significant dividends. Look for dividend yields of at least 2% in high quality stocks or equity funds. Growth stocks are often hardest hit when corporate profits fall.

Diversification and balance are your keys to success when investing money in 2011-2012. There are times you can invest aggressively, and there are times when a more cautious approach is called for. With interest rate hikes looming over the markets, this is not the time to throw caution to the wind. 

Author James Leitz teaches investment basics, stocks, bonds, mutual funds and how to invest in his investing guide for beginners called INVEST INFORMED. Put Jim’s 40 years of investing experience to work for you and get up to speed at http://www.investinformed.com. Learn how to invest.