It is important to consider the value of diversifying your financial holdings through investing. Whether you are planning to send your children to college, buy a home, meet income needs in retirement or start a business, these goals may be reached through a planned program of savings and investing. Through investing, you have the potential to increase the amount of your invested capital, often at higher rates than traditional savings accounts. A look at returns for various classifications of investments (known as asset classes) shows that the compound annual return from 1926-2011 favors investing in small cap stocks well over safer asset classes such as U.S. government bonds and treasury bills.
According to US Emerald Energy (click here), if you are new to investing or are considering different ways to grow your money, here are some investments you may want to consider: mutual fund investing, investing through investment clubs and dividend reinvestment plans and investing in oil and gas investment programs. Remember that all types of investments carry some form of risk, include the risk that you may lose some or all of the money you have invested. You should carefully read any information provided regarding any planned investment and be sure to ask A LOT of questions before investing. If the information provided is unclear or does not answer a specific question, always consult with an investing professional for guidance.
Stock Advisors, and Mutual Fund Investing
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Mutual funds are defined as redeemable, open-ended investment company shares that entitle you to a proportionate share of the fund’s net asset value. Mutual funds are sold by prospectus, a legal document required to be given that provides essential information regarding the fund, investment policies, risks, assets and other details needed for you to make an informed decision. According to US Emerald Energy (www.usemeraldenergy.com), mutual funds represent one of the simplest ways to get involved in investing by matching your level of risk (from low to moderate to high) to the types of investments that are held by the fund. Investing in a mutual fund is considered passive investing because you are not involved in the selection of securities held in the fund’s portfolio but benefit by the fund’s management, experience and expertise in order to generate positive returns.
Investment Clubs and Dividend Reinvestment Plans (DRiPs)
If you are a person looking to invest in individual stocks without the use of an investment or fund manager (as in the case of a mutual fund) you may consider joining a local investment club and/or getting involved in a dividend reinvestment plan (DRiP). Investment clubs are partnerships formed by a group of individuals who pool their money for the purpose of making money in investments. Generally these clubs meet frequently in order to make investment selections, collect dues and discuss types of investments. A device that is popular with investment clubs is called a DRiP. DRiPs allow you to buy several shares of stock and use dividends paid to purchase additional shares. DRiPs have a low cost of entry and may be a perfect way to learn about stock investing without risking a large sum of initial capital.
Oil and Gas Investing
An oil and gas investment program is also a form of passive investing, much like investing in mutual funds, which allow you benefit from the windfall associated with new oil field discoveries and gas production. Participating in oil and gas investments—whether partnerships, direct participation programs or unit investment trusts—involve varying degrees of risk and may not necessarily provide you with immediate returns. Some of these types of investments may also provide you with passive losses, which may be beneficial—depending on your tax situation.
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