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Investment Strategies: Make Your Money Work for You

When it comes to investing your money, you have a variety of options: the stock market, real estate, CD accounts and venture capital accounts, to name a few. Your investment choice will depend on the amount of money you want to invest, the amount of time you wish to invest it and the degree to which you are will to risk the amount invested.

Making a financial investment intimidates many people. Why risk your money in an uncertain investment when you can keep it safe in a savings account? While it's true that investing can be risky, the potential profits from most investments are far greater than the minimal. amount of interest your cash earns in a savings account.

With this in mind, remember that investing is not as difficult as it seems. However, having a clear understanding of investment terms and regulations is important. If you cannot find the time to monitor your own investments, you may want to consider investing with the help of a financial consultant.

Tips for Investing
Making an investment is not a short-term financial solution: you have to think long-term. Investing has a risky reputation, in part, because people sell as soon as a stock or other commodity starts to drop in price. Successful investing requires a time commitment. You must be willing to let your investment ride out the ups and downs of the market over a period of years.

Perhaps the most painless way to make an investment is to assign a set amount of money each month towards the investment. Commit yourself to investing this set amount of money every month, regardless of the current market value of the investment. Try to avoid letting the investment's current worth affect your constant.

Types of Investments
Different investments carry different levels of risk and potential profit. As a general investing rule, the higher the risk involved, the more interest an investment is likely to make. Possible investments include:

• Stocks: Stocks are one of the most popular types of investment. Essentially, you pay for partial ownership in a company. If the company does well, your investment grows. Stocks may be ''common'' or ''preferred.'' Both carry a certain amount of risk. In times of financial difficulty, preferred stocks are reimbursed before common stocks.
  
  
• Mutual Funds: Mutual funds allow for more diverse investing than individual stocks. A mutual fund manager, who buys and sells stocks based on the market, controls the money collected from thousands of investors. Those investing in mutual funds usually incur a management fee.
  
  
• Futures: Futures involve making contracts to buy or sell specific commodities, usually agricultural products or mined products, at set times for set prices. Investing in futures is both complicated and risky.

Investing in the Stock Market
One type of investment is stock market trading. The term stock market generally refers to the buying and selling (trading) of stock through exchanges and over-the-counter (OTC) trades. Stock exchanges are organized markets for trading stock at specific locations.

The major exchanges, the ones we hear about most often, are the New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX), both located in New York. NASDAQ, the National Association of Securities Dealers Automated Quotation System, is the primary OTC market. In addition to these famous trading houses, a number of smaller regional exchanges in large cities throughout the United States also trade stock.

The NYSE and the AMEX use brokers who physically trade stock. The NASDAQ trades primarily online. While older and larger corporations are generally listed in the exchanges, thousands of smaller and high tech companies are traded only through NASDAQ.

Here's how the stock market works: The stock market encourages investment by offering stock to be bought or sold. Investors place trading orders through brokers. Companies issue stock available for purchase to such investors to obtain capital to expand their businesses. Stocks are actually shares of ownership in a company. Owners of stock receive a portion of the profits, referred to as dividends.

Simply put, investors in stock make money in two ways. First off, buying at a lower price and selling at a higher price yields profit. Investors also make money through dividends.

When considering investing money in the stock market, keep in mind that it is a volatile investment, meaning stock values unpredictably fluctuate up and down. Since we do not have crystal balls and cannot always anticipate the future value of a particular stock, investors are wise to develop some strategy for trading.

One such investment strategy is called diversifying, the purchasing of stock from different sectors (different kinds of companies). Buying stock from a variety of companies offers some degree of protection due to the fact that when one stock is down another may be up. This is one way to balance your stock portfolio.

Trading Options is Risky Business
People can also play the stock market by trading options, rather than just buying or selling them. Trading options refers to the act of putting a partial amount of money down on a stock purchase. In this type of transaction, the option trader borrows against perceived profits. He is essentially betting on the fact that the stock will make money to pay for the amount that he owes on it. Trading options is a highly risky affair because the trader starts off owing money. This type of trading is not recommended for the novice.