Learn Where to Invest and How to Invest Money

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  expression 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.


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