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Simple tips on personal investing from a regular person. This balanced investment strategy is designed to be low maintenance as well as low risk, so investing doesn't have to become your second job.

Low Risk Investment Strategy

Before we get into the meat, let me make a confession.  I'm not any kind of professional financial advisor.  I'm sure you waded through several of those to get here.  I'm just a regular guy trying to make the best investment decisions.  This is to share what I've learned by experience...the purpose of investing is to protect what you've earned against inflation and taxation and earn a little more so you can use it for your future needs.  Many people think the purpose is to make buckets of money get rich quick. 

The quickest way to double your money is to fold it in half and put it in your pocket. (Will Rogers)

You can ignore the stories of the people who put all their money in a company and "made a killing".  Even if it occasionally happens, there are thousands who lost it all for every one who lucks out.  "He who saves a little at a time makes it grow." Solomon, 2900 years ago.  If you're going to invest the money you've saved by years of sacrifice, you need to put it at a much lower risk.  No, it won't be doubling this year, but you won't be losing half of it, either.  My first experience in the stock market was the "bursting of the bubble"  We lost 66% of our life savings in 18 months.  So, never invest money you can't afford to lose.  Even though we're covering a very low risk investment strategy, it isn't "no risk."  My strategy is conservative because of my experience, but should bring in 7-10% per year over the long term, which is the only term to be investing.  This strategy is also low maintenance.  You don't need to become a financial expert to make money in your just need to be careful.  Here are some recent popular books about investments and reducing risk.

Definition Of Investment Investment is putting your money at risk, to be used in business long term, in the hopes that you can receive a good return on your money.  You've heard of day-trading, margin trading, and commodities trading?  This is gambling...not investing.  If you invest, it's over 5 or more years...the longer, the better.  You want your investments to have a chance to overcome seasonal problems in the market.  The Dow Jones Industrial average gained 10.5% per year over the last 100 years, despite depression, 2 World wars, the Cold War, the War on terror and many recessions.   During that time, there were many down years but they were more than compensated for by the up years.  Investing isn't putting your money in a savings account, the money market, or a CD...that's called saving.  The returns on these types of accounts rarely keep up with inflation and taxation.  These are great secure places to store your emergency money short-term, but as you accumulate more money, you must find a better return for your money, without putting it at too great a risk.  If you want professional help for your investment plans, I recommend my Financial Advisor, Eric Bates.  But first, why invest at all?

Education Financial Planning One of the reasons to invest is to provide for your children's education.  We'll assume Jr. has just been born, so you have 18 years to get ready.  Obviously, you'll need to put more away each month if Jr is 10 years old.  A good 4-year college today costs about $ 50,000 for tuition, fees and books...double that for private school.  Add in the fact that these costs are rising at around 8% per year, so the cost will be over $ 300,000 in 18 years. Now you can see you'd better start saving...or hoping Jr. will want to be a surfer.  You should invest $ 250-500 per month for each kid you want to put through college in 18 years.

Financial Retirement Planning Probably, the most important reason to invest is planning to provide financial security for retirement.  Incase you haven't gotten the memo, the U.S. Social Security program doesn't pay enough and isn't guaranteed to be there in the future...I'm sure the Government programs in other countries are just as questionable.  When the tax payers have had enough, they will vote to shut them down.  Maybe your employer or union has a retirement program you're relying on.  Don't!  One major US employer has recently dumped their program on the Government (paying pennies on the dollar to the retiree) and many others are lining up to do the same thing or go bankrupt.  You need to have your own retirement investments and they need to be enough to cover your needs in old age and illness, because there may be nothing else to rely upon.  As high as it seems, you could need income producing assets (not counting home) of $ 1,000,000 or more.  Let's say this is your goal and you have 30 years until retirement.  With a 7% return, you would have to invest around $ 833 per month.  If this investment amount seems impossible, you might want to visit our Tips On Budgeting and Debt Free Living Help pages to find out how to squeeze money out of your budget.  Now that we know the 2 major reasons to invest, it's time to get to our low risk investment strategy.

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