The long and short of saving

When deciding how to invest your hard-earned money, it’s important to realize there is no “one-size-fits-all” strategy. How much you invest, the types of investments you choose, your timeline, and tolerance for risk should all factor into your decision-making process. After all, it’s your money, and you have to be comfortable with how it’s invested.

Short jaunt
Consider parking your money in a short-term vehicle guaranteeing a positive return such as a Certificate of Deposit (CD, or Share Certificate). The downside of a CD is that your money is locked up for the term of the CD (early withdrawals usually mean penalties). If you think you might want to tap into that money early, then a traditional money market account (which functions more like a basic savings account) might be better. Money market accounts offer more flexibility to withdraw your money when you need it, but may have other restrictions on the number of withdrawals per month or minimum balance requirements.

Long haul
If you’re in it for the long haul, you want to follow these basic rules.

Diversify. If you invest in stocks, spread your money among several of them. If you only invest in one stock and it hits bottom, you’re out of luck. But if you own several stocks and one loses value, it can be buoyed by others that perform better. Or, consider buying into a good index fund or low-cost mutual fund. Funds come pre-diversified (you’re buying into a company that invests in multiple stocks) and are good for beginners just learning the ropes.

Tune out the noise. Don’t be distracted by the talking heads on TV. Ignore the media’s focus on daily changes because the market naturally fluctuates. You’re focused on the long-term, and if history can serve as our guide, you’ll do quite nicely by letting the greatest asset you have–time–work for you.

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This entry was posted on Thursday, December 17th, 2009 at 10:03 am and is filed under Archive. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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