Managing Your Investments
By: Source: AARP.org Date Posted: 2005-03-20 12:08:56
You don't just wake up one morning and decide it's time to start investing your extra cash on Wall Street. Before you're ready to buy that first stock, bond or mutual fund share, you'll need to do some homework. Sure, you'll want to bone up on such investing concepts as risk, return, and diversification. But you'll also want to figure out a few things about yourself.
Your Goals
We all know that people invest their money so they can make more money. But how much money do you need? When do you need it? What will you use it for? Your answers to these questions are your financial goals.
Maybe you want to put children through college, finance the care of an aging parent, and plan for retirement. Start off your investing process by calculating how much money you already have on hand to meet your goals. Then, estimate how much money you'll need to earn, and how many years you have to earn it. Knowing where you're going and when you need to get there will help you choose the proper investments. If you need help setting your financial goals, see Creating a Financial Plan.
Your Style
Make no mistake about it. Investing is risky. Save yourself some sleepless nights by deciding up front how comfortable you feel about taking risks. Investing in a new company, for example, may give you a higher return in the end, but it could also give you ulcers. For a smoother ride down the road, take some time now to look honestly at yourself and gauge your tolerance for what could be a financial roller coaster.
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