WHERE TO START WITH SHARE TRADING:
When considering our financial future it is nice to know that there are several options and ways to invest. The downside to this is trying to wade through the multiple options to find the right path for your current needs. Investing is never a stagnate path, it is always changing as our needs and circumstances change.
If we carve up our financial and personal needs in to four main categories it is often easier for us to see what path we should travel down. The four categories will be Liquidity needs, Goals and Objectives, Time Horizon and our Risk Profile.
LIQUIDITY NEED: This is the amount you need on hand for emergencies and other short term goals. The money that we don't want tied up in long term investments.
GOALS & OBJECTIVES: What are we trying to accomplish with these investments? Do we have a specific goal in mind, such as a house, or retirement?
TIME HORIZON: How long do we want to wait to see our returns?
RISK PROFILE: What kind of risk are we able to tolerate? What can we put out there and still sleep at night and not burn ulcers through our spine?
These four areas are the essentials to finding the types of investments we want to use from the long list of available markets and paths out there today. Answering those four areas makes the path fairly obvious.
BEGIN AT THE END:
Every great mystery writer knows the best way to write a good story is to start at the end and work your way backwards. Solving the mystery of good investment plans is very similar. Start with your retirement plans and work back to your day to day needs. Your current liquidity is of course the primary need. If the car needs new brakes, or the front window gets smashed, or the wash machine is chewing instead of cleaning, these problems have to be solved, and money expended, otherwise we are going to have a difficult time maintaining jobs and relations. After we have a comfort zone figured out for your primary liquidity needs however, retirement plans are the best place to jump to, for several reasons.
First off, investments setup for retirement are often protected from situations such as bankruptcy and lawsuits. Retirement is a protected area from these, and often will be left alone even when everything else is taken. So it is always a good idea to have investments dedicated for retirement purposes. Second, there are often very good tax advantages associated with retirement investments, such as 401(k) plans, deductible and Roth IRAs, Keoghs, and SEPs.
WHY RETIREMENT PLANS SHOULD BE YOUR PRIORITY:
Retirement Plans*:
The investments you make toward most retirement plans are tax deductible.** These investments and the interest and gains they accrue are not taxed until the money is withdrawn.
The income earned in most retirement plans is not taxed until you make a withdrawal.**
Having your financial security funded gives you peace of mind.
Other investments:
The money you put in other investments is not tax deductible.
The income earned on your other investments is normally taxed currently.
If you are funding other investments rather than your retirement plans, not only are you giving up tax benefits, you may be putting your own financial future at risk.
* 401(k)s, IRAs, Spouse’s 401(k) plans, Keoghs, etc.
** Contributions to a Roth IRA are not tax deductible, however qualified withdrawals are tax-free. To qualify, the IRA must be held 5 years and withdrawals begin after age 59 1/2 or due to death or disability. Young investors may be a bit skeptical about taking from their pool of available investment funds for long term retirement investments. All I can say is that the more you have in your retirement area, the better you will feel about your other high risk / high yield investments, and that is a very important part of making good decisions.
Now that we have covered the basics of getting ready to invest online, the next step is to figure out 'How much money do you need to start investing". I will post an article shortly in regards to this.
Goodluck with your Online Trading adventure - http://www.sharetradesecrets.com |
