The Basics of Saving and Investing

You may not have thousands of dollars lying around to invest, but through effective financial planning, learning about market options, creating a savings plan that you can stick to, and researching the investment scene, you can become a savvy financial whiz with money and investments to spare. 

There are so many components to financial planning, it is best to research first and find a method that works for you.  The Internet is great for this. Here’s a simple way to explain financial planning: First, you need figure out where you are financially. Second, decide where you want to be financially. Third, Design a financial plan to meet your goals. Fourth, put your plan into action. Fifth, continuously monitor your plan for effectiveness.

Once you get your finances set on the right path and have money to invest, you’ll want to learn about the financial markets. There are many methods and ways to invest in the financial markets.  You can buy bonds or stock in a company that is doing well. The company sells bonds and stock to raise capital so it can continue to grow—if a company goes public it will sell stock in itself, and then instead of being a private business owned by a few it is owned by a large pool of investors. The futures market is another way you can invest, but this type of investing is much riskier than others because it involves taking a chance on the way prices in certain industries fluctuate. 

Investing takes place in a financial market. This is a place where firms and individuals buy and sell specific products such as stocks, bonds, or futures contracts. Of course, buyers seek to buy these products at the lowest price available, and sellers seek to sell at the highest price available. There are many different types of financial markets—all employ professionally trained people and are highly regulated. If you want to open a savings account or want to get a loan, you would go to a bank or credit union. When buying stock, mutual funds, or bonds you go to a securities market. Examples of securities markets include the New York Stock Exchange and the American Stock Exchange. You can hire a professional broker to handle your trading, or you can do it online in the Over-the-Counter market.

There are more than a few factors which affect the markets; actions of the investors, buying and selling stocks, bonds and futures; business conditions—the condition of the business and the strength of the its industry; government actions through regulation of the financial markets, interest rates and taxes; economic factors such as the inflation rate and the unemployment rate; international events such as currency values, trade barriers, wars, natural disasters and governmental changes. 

The investment world can be a bit shady, if you don’t know what to look for. The FBI recommends, “investors think before investing in anything and be wary of any investment that offers unusually high yields by buying and selling anything issued by Prime Banks. Independently verify the identity of all people involved in an investment, the veracity of the deal and the existence of the security in which you plan to invest. Make sure you fully understand all aspects of an investment before investing.”

To find further information on investing, the Internet is a valuable resource, as is a professional broker. Before attempting to invest, you should know the facts and feel confident about your choices. Starting out with a safer investing option such as a government bond or a money market account may be the way to go for you, but you won’t know until you have all the facts.

Financial planning and investing can be very complicated and require in-depth knowledge to navigate the markets and to be successful. However, if you are armed with the facts and know where you want to be, you can be financially fit and even create a healthy investment portfolio.

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