Investing regularly is something everyone should do.
However, many people are trying to make investment decisions with little information.
Take this simple quiz to determine just how much you actually know about investing your money.
Just decide whether each of the following statements is true or false.
1.
The stock market is a good place for investing funds you may need in a year or two.
2.
If you have shares in a mutual fund and need to sell, you must wait for each individual stock to sell before you can get your money.
3.
Investing in real estate is always a profitable choice.
4.
You should always use a traditional brokerage firm to handle your investing activities.
5.
A savings account is a good method of investing for retirement.
It may surprise you to learn that all of these statements are false.
1.
The stock market is not the place for short term investing.
You make money investing in stocks by holding them until the most opportune time to sell.
Rarely is it most profitable to "flip" stocks, particularly if you have chosen safe investments, such as blue chip stocks.
Fees and taxes can devour what little profit you might earn.
So if you know you are going to need to access your money within the next couple of years, skip investing in stocks.
You will be better off with a certificate of deposit or money market account despite the low interest rates these accounts pay.
2.
Exact terms vary by fund, but shares are typically sold back to the mutual fund rather than being placed on the market.
Investing in mutual funds is normally a safe choice, although you will not normally see huge profits.
When investing in mutual funds, select those with a proven track record, and the longer the history, the better.
Many funds have been in operation for forty or fifty years, so you should be able to get a pretty good idea of how they will perform before investing your money.
3.
Investing in real estate can be profitable, but it is not always safe.
For example, during the 1980's, many areas had property prices that were highly inflated.
Coupled with high interest rates, this had a devastating impact on the market.
As it always will, the market corrected itself.
Many people found themselves "upside down" on their mortgages, owing more than the home was now worth.
Often they were unable to escape the double digit interest rates by refinancing, because they needed to pay significant amounts just to refinance to 100% of the home's value.
Investing in such a market drove many speculators to bankruptcy.
Before investing in real estate, it is critical that you understand all aspects of the market that could impact your investment.
4.
A traditional brokerage firm is going to charge you traditional fees.
For a beginner interested in investing a few hundred dollars, online services that charge a small flat rate per transaction are usually better choices.
Also, those who are experienced with investing can also often forego a traditional broker, since they often have an idea of which companies they want to own.
No matter how you choose to handle your investing, always research the stocks or funds you want to buy.
5.
Savings accounts are not for retirement, although having a nest egg can be a nice bonus.
Passbook accounts do not generate much interest, and should not be considered a viable form of investing, particularly for retirement.
Investing for retirement should take the form of IRAs, 401(k) plans, or SEPs if you are self employed.
Use savings accounts for easy access to funds in the event of an emergency, or to accumulate funds for a major purchase.
The more you know about investing, the greater your rewards will be.
Never assume that any one person knows it all, since things can change quickly in the investing world.
And never stop learning about investing-it's your money, and you need to be involved in your financial future.