Fundamentals of Investment and Financial Planning
When you get a handle on the basics of financial planning and investment within the investment management to get a whole lot easier. Here are 5 main Fundamentals of investment and financial planning or factors to consider before investing money.
Most financial planning involves the management of investments and the selection of the best investments to achieve your financial goals. There are long-term goals such as money accumulated for retirement or earning more income in retirement investment. And there are short-term goals like saving for future college costs or a reserve currency for payment on a new home. What investment basics to consider before investing money for specific purposes? Note that the first step in financial planning is to define your financial goals.
For shorter-term goals of safety and liquidity are the main elements of investment to take center stage. Here are investing the money that needs to be safe and available when needed. The best investment in this case is the choice of bank CDs and savings accounts, mutual funds and bond funds can be short term. Do not divert the funds of shares or other investments more risky for short-term goals. The money you need may not be available when needed if the market goes south at the wrong time.
If you are doing financial planning to accumulate a reserve for retirement is a long-term financial goals and growth and tax benefits are the basis of investment focus. Growth refers only to earn a higher return on long term. The best investment for most people here stock funds, which come in many varieties. Spend much of your portfolio to stocks depends on your age and risk tolerance. This is where you invest money in shares and accept the additional risk makes sense. If you have a bad year or two you have time to recover and not have to kill or sell at a loss … because you have this money earmarked for retirement and other funds as a cash reserve to cover short-term needs.
Look for tax advantages when investing money for retirement. In a city of 401k or traditional Ira money can accumulate tax deferred, tax relief each year adds to it. There is a limit imposed by the IRS in the amount you can invest in a tax-deferred annuity and a Roth IRA offers tax-free investment. If you invest $ 5,000 per year on an average stock fund by 10% growth per year to an account tax free or tax deferred money grows to $ 286,000 in 20 years. This money can keep growing without interruption for the taxes until you start throwing money at retirement. In a Roth plans do not have income tax to pay if you follow the rules.
The last factor to consider is income. For most people in search of higher profits or interest, bonds and bond funds are the best investments over the years. Millions of retired people invest in bonds to supplement their income. Invest in bonds for the income they generate is secondary to a younger average investor, which should include bond funds in your retirement portfolio mainly to add balance and reduce the overall risk. Note that the bonds and funds that invest in it, is not without risk. There are many articles available on the subject.
Now you know the 5 things you need to consider investment management, selection and financial planning. I call them the basics of investment. Never invest money without it.