Most people want to know what the best investment is for them. What investment information should they be aware of and which investment options fit their needs? Here’s how to get your ducks in a row before you invest money.
Many people go to free personal investing seminars looking for investment information. They want to invest money, but don’t even know what their investment options are. What do they get? Maybe they get a free lunch; and likely they get a sales presentation.
When I was a financial planner I designed my personal investing seminars to be different because most of the ones I had been to turned me off. I didn’t try to sell a specific financial product as being the best investment for everyone present. Instead I emphasized general basic investment information like: what your basic investment options are, and how to select the best investment for YOU.
Before you invest money consider 5 things, in this order: liquidity, safety, growth, income, and tax advantages. How import is each to you, on a scale of 1 to 10? You can’t have it all, because there is no perfect investment. But if you’re honest with yourself you can eliminate investment options that are not appropriate for you in your search for your best investment. Here’s an example of how this game of elimination works.
Let’s say that you want to invest money for retirement, and you plan to retire in 10 or more years. You don’t need high liquidity (quick and easy access to your money) because you expect to keep this money working for years. You are willing to give up high safety in return for growth and the potential for higher investment returns. Receiving interest income is not important, but if you could get a tax break you certainly would not pass it up.
What investment options can you eliminate, and what might be your best investment? You can eliminate: savings accounts, CDs, money market accounts, Treasury securities, and other investments designed to pay interest income with a high degree of safety. What’s your best investment?
Opening an IRA with a mutual fund company could offer you growth potential and tax advantages.
On the other hand, if you need ready access to your money and/or interest income you don’t need a mutual fund IRA; you need the likes of the investment options we just eliminated above.
The next time you consider an investment rank it by the 5 criteria above. That’s the investment information you need to find an investment that best fits you.
A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.
Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com.