Money Sense Tips

Some view putting money into stocks, bonds and other investments as nothing more than gambling. Others see it as a smart strategy for making your money work for you.

So, who’s right? Well… it depends on how you view it.

In fact, there is no secret that practically all investments carry some degree of risk. Stocks can lose value, or their issuers could stop paying dividends. Bonds may not be repaid as agreed. That’s why it’s so important to thoroughly research any investment you make.

But some investors prefer to buy and sell attractive stocks in the hope that they will increase in value. If this works, it can bring them a nice sum of money in a short time frame. If it doesn’t, they could lose big. Trading in this manner is known as speculating.

Investing in its true sense is putting money into something and leaving it there for the long term. By using this technique with stocks, investors can collect dividends. While one dividend payment may not amount to much, dividends are usually consistent over time. They are usually even paid when the company experiences a downturn. Over several years, an investor that sticks with a reliable dividend-paying stock will almost always come out ahead.

Another component of a sound long-term investment strategy is diversity. While speculators often invest all of their money in one market sector, savvy investors know that spreading their investments out is far less risky. The various investments balance each other out, so while some investments may lose money, the gains of others tend to make up for it.

Speculators, on the other hand, tend to invest heavily in one market or market sector that is showing an upward trend. While this sometimes works out well, one must sell at just the right time to make a profit. This means looking for signs that the market in question is at its peak, and that’s not always easy to do. Often speculators wait too long, and the market crashes before they have time to sell. This can result in substantial losses.

Despite all the risks, speculating is alive and well. Those who use such strategies are usually looking for a way to turn a quick buck, rather than investing wisely and reaping the rewards later. But as with any get rich quick scheme, speculating has a tendency to blow up in one’s face.

Investing is a complex game, and it requires a great deal of patience. You may not see returns right away, but if you do your homework and choose solid investments, you can make lots of money in the long run. Speculating is more like taking your money to the casino. You might get lucky at first, but if you continue, the odds are not in your favor.

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There are two schools of thought on this question: Some economists suggest now is the perfect time to invest in the stock market, while others claim you should sell all your stocks and run for the hills.

Perhaps both are correct! As the situation stands now, stock market analysts are waiting for the dreaded bottom to fall out from the market. They thought it would happen on Oct. 24th, but it didn’t.

While most experts are now saying we are in a “global recession”, if the foreclosure rate continues, we may hit bottom sooner than later. So what should you do?

First, don’t make decisions based on fear or panic. Think about the long-term effect. If the old mantra of “buying low and selling high” is true, then you may wish to wait until the stock market falls even further.

Analysts say there are many bargains out there, and now is the time to take advantage of them. However, we do not yet know the full effects of the recession and how it will play out nationally and globally, so you may want to wait awhile to ascertain if it is worth it to even venture out into the “path not taken”.

Warren Buffet has an entirely different view. He feels now is the best time to invest in the stock market and he put his money where his mouth is by investing $5 billion dollars in Goldman Saks. Of course, he can afford to take this risk. Those of us who live from paycheck to paycheck cannot.

Quite frankly, if you asked ten analysts and economists what they thought about investing now, you would receive ten different answers.

If you have never invested in the stock market before, you will need to spend quite a bit of time researching companies, profits, and other variables. You may even wish to tune in to Jim Cramer. Recently, he told his followers to sell all their stocks!

If you are an investor, you may have a pretty good idea of when to hold and when to fold. All of this requires prudent and thoughtful consideration to what is happening around the world. It is difficult to feel confidence in the stock market with foreclosures and unemployment on the rise, banks closing their doors, corporations dismissing thousands of people, cost of living higher than ever, and the prospect that OPEC will decrease oil distribution by 15 million barrels.

Perhaps this is a time when we start investing in ourselves by budgeting wisely, seeking promotions, applying for second jobs, or opening a home-based business. There is enough stress already, financially and emotionally – why add more?

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