Short-term and Long-term Investments
Any investment plans you make should ideally be based on certain pre-determined goals. These goals should be specific in terms of what you are saving for, how much money you require and when you require this money. There are generally two kinds of investments you are likely to make, short-term investments and long-term investments.
Short-term investments
Short-term investment is an investment that fetches you returns on your money in a short time frame such as a few months or even a couple of years. If you choose the right short-term investment, it will generally have a high interest rate and allow you to earn a substantial sum of money.
People generally make short-term investments if they foresee an urgent requirement for money in the near future. For instance if need to make a down payment on an apartment or for a second car in a few months, you can consider a short-term investment. You can decide on how much you will need to meet your requirement and plan on how much you should invest accordingly.
Some good examples of short term investments are money market funds. They generally have higher interest rates compared with traditional savings accounts and restrict your access to the money for a specific period of time. The good news is that the money you have placed in the fund will be earning accrued interest.
Gold investments also make great short-term investments. You can invest in gold when the price is low and then sell it when the price is high. Mutual funds are also another short-term investment option you can consider.
There are certain advantages and disadvantages to making short-term investments. Keep in mind that short-term investments with high interest rates are more often than not high risk investments. So there is a chance that you may lose your money. If you want to mitigate your risk you will probably need to choose something with a lower interest rate. Another disadvantage is that some short term investments have penalty options if you decide to withdraw your money before the maturity period.
The advantages of short-term investments are that they allow you to make money for those expenses that you have right away. Short term investments also help protect your long-term investments. Since they satisfy your need for immediate expenses you do not need to break into your retirement fund or other long-term accounts.
Long-term investments
Long-term investments fetch you returns after several years. People generally make long-term investments for their retirement or their kids' college funds. Long-term investments are very important. For example the quality of your life after retirement will probably depend on the kind of long-term investments you have made. As with any kind of investment, it is good to set a goal for the investment. Ask yourself why you are making the investment. If it is for say a retirement fund then ask yourself how much you would need to live comfortably after you retire. Factor in a percentage for inflation when you arrive at this figure.
Now decide what percentage of your income you would like to invest to fulfill your long-term goals. Generally people prefer to put aside 10 to 15% of their income toward this. There are a variety of options available when you are making long-term investments. Make sure that you choose the right kind of investment options. Consider getting the help of a financial advisor if necessary to guide you in making good investment choices.
Ensure that you diversify your portfolio and choose a mix of different kinds of investments. If your investment portfolio has just one or two kinds of investments, you could lose everything, if those investments do not work out.
Monday, May 12, 2008
Start Saving Early and Watch Your Nest Egg Grow
Most people agree that it is important to save.
When should you start?
Most people agree that it is important to save. However a question that often comes up is what is the right time to start saving. Several people suggest starting as early as possible to ensure a secure retirement. While you may agree that starting early makes sense, you may also believe that starting early is for the rich. Or you may even agree in principal but feel that you just can’t save right now.
So why is it so important to start saving as early as possible? The answer to that is quite simple really. It is the power of compound interest. Over a period of time your money will compound. Your investments will generate profit, and then that profit in turn will also earn a profit. So getting an early start on saving offers you a very lucrative and simple way to make your money grow.
Here's an example.
Assume that an individual starts saving $1000 per year at 22 and stops at 30. Assume that another person also saves $1000 per year. However, he starts at 30 and stops at 65. Now if they were to earn an interest of 10% on their savings who do you think will have more money at retirement? You may be surprised to hear that the first person will net a larger nest egg when he retires. Although the first person invested only $8,000, by the time he turns 65, his net earnings will be $380,865. On the other hand, the second person will save $35,000 by the time he turns 65. However, his net earnings will be $294,039 which is exactly $86,826 less than the first person’s earnings. So when it comes to saving, the early birds have a definite advantage over the late starters.
The first person saved $1000 per year for 8 years. The second person also saved $1000 per year but after 35 years of saving they still did not have as much at 65 years as the first person did. Now let your imagination run wild and try and conceive how much the first might have had if they had kept up their annual saving routine.
In today’s economic climate however $380,000 is nowhere near sufficient for most people to maintain their lifestyle once they retire. Consider that well over 50% of workers reaching retirement age do not have sufficient funds and survive on handouts and welfare. Is this the way you would want you and yours to be when you and they reach retirement?
The importance of starting saving early to maintain your lifestyle on Retirement
A simple formula
Having established the importance of starting early, the question that often comes up is how much to save. Here is a simple rule of thumb that should net you a decent enough amount to meet your retirement needs. This is assuming that you were to start saving at 25 when you land your first job. Now you can save 10% of your income till you turn 30. Five years later, once you turn 30, you will be well established in your career and may also be receiving a substantially larger pay check than when you first started out. Now you can consider increasing your saving to about 20% of your income. You can step up your savings in every subsequent decade of your life. So even as your paychecks become larger and larger you can correspondingly save 30% of your income in your 40s, 50% of your income in your 50s. This averages out to a saving of 30% of your income since you were 25 which should be a sizable amount for you to retire on comfortably.
It might even be a better idea to maintain an increase in savings with each wage rise. Should you not do so you may tend to accept any increase in pay as an increase in spending and this is not really good for maintaining your savings mindset.
As you can see getting a head start on your saving and saving at a steady rate will ensure that the effects of compound interest are amplified so that you can maximize your returns when you cash out!
It is not necessary to wait until you start work to commence your savings. Nor is it necessary to wait till then to start learning about saving and budgeting. Perhaps it would be wise to consider searching for ways to supplement your budget or income from your very first pocket money days. It is widely believed today that developing your savings mindset should be taught from your earliest school years.
Friday, May 9, 2008
Fostering a Savings Mindset
There are many ways to save money and once you get into the swing of saving it is not as hard as it appears. In fact after a while you will even find that saving has become second nature to you. So here are a set of 4 simple tips that will help you foster a savings mindset. We have picked tips from different areas of life such as grocery shopping, dining out, and travel.
Tip #1: When shopping for groceries buy items in multi packs whenever possible. It works out far cheaper than buying singles of anything.
Tip #2: Pack your own lunch instead of picking up something at the local deli. Assume you were to pack lunch thrice a week saving $8 each time, it would add up to a saving of $1152 per year. There is an important lesson here where saving is concerned. We often spend small sums unthinkingly assuming that there is no value in saving such amounts. However as you may have noticed in the above example, even the small change can add up to quite a bit over a period of time.
Tip #3: Eating in restaurants is quite expensive. But we all love our little comforts and luxuries in life. Now it would not be practical or even possible to promise yourself that you won’t eat out. However, what you can do instead is to have drinks and appetizers at home and then go out for a meal. Think about it! Drinks at restaurants are pretty expensive. Many restaurants charge as much as $5 for a cocktail and a glass of wine may cost $7-8.
Tip #4: Assume you need to travel. Are you on the verge of picking up the phone to call your travel agent to make the booking? Hang on a second. Consider scouting around the Internet instead. You are bound to find good bargains on airline seats here.
Tip #1: When shopping for groceries buy items in multi packs whenever possible. It works out far cheaper than buying singles of anything.
Tip #2: Pack your own lunch instead of picking up something at the local deli. Assume you were to pack lunch thrice a week saving $8 each time, it would add up to a saving of $1152 per year. There is an important lesson here where saving is concerned. We often spend small sums unthinkingly assuming that there is no value in saving such amounts. However as you may have noticed in the above example, even the small change can add up to quite a bit over a period of time.
Tip #3: Eating in restaurants is quite expensive. But we all love our little comforts and luxuries in life. Now it would not be practical or even possible to promise yourself that you won’t eat out. However, what you can do instead is to have drinks and appetizers at home and then go out for a meal. Think about it! Drinks at restaurants are pretty expensive. Many restaurants charge as much as $5 for a cocktail and a glass of wine may cost $7-8.
Tip #4: Assume you need to travel. Are you on the verge of picking up the phone to call your travel agent to make the booking? Hang on a second. Consider scouting around the Internet instead. You are bound to find good bargains on airline seats here.
Thursday, May 8, 2008
Article Marketing
A good way to promote your product or service is via article marketing. You can write and distribute articles online to boost traffic to your website and increase your sales accordingly. Articles which have been carefully written can be freely distributed over the Internet to boost the authors’ business credibility within the market and get new customers. However, like any other form of marketing, article marketing also needs to be done keeping certain guidelines in mind.
Choose your articles carefully: First analyze the product or service that you are promoting. Ask yourself what would interest people who are likely to buy this product or service. Now create a list of articles you can write which will include information and tips which your potential buyers are likely to find useful. Think of your articles as hooks to grab your potential clients’ interest and draw their attention in the direction of your product or service.
The right title matters: The title of your article will probably play a big role in determining how much traffic is directed to your website. It will have a significant impact on how many people access and read the article. Therefore it is important to ensure that you use the right keywords in your title so that users are interested enough to click on it.
Keep it short: Since most people browsing the net have very short attention spans, it helps if you keep your article as short as possible. Aim for a word count of 400 to 600 words. Make every word count for something. The idea is to pack in as much useful information as possible within your article.
Useful and incomplete information: Your articles should provide useful information which your users can actually apply in the context of their personal or professional lives. However the trick is to leave this information incomplete. The idea is that your article should trigger the readers’ curiosity and leave them asking for more which they can get when they actually buy your product or service.
Your information can be in the form of tips, a tutorial, a step by step guide,
The finishing touches: Proofread your article. Make sure that no typos or other unwanted errors have crept into your writing. If possible get your article reviewed by a peer or colleague. This will help you get a fresh perspective on your article.
Publish your article: Now you are ready to publish your article to ezine directories and of course upload it on your own website. You can use automated article submission services to submit your article. This is an efficient way to submitting your articles. The software will submit a certain number of copies of your articles for a set price to various ezine directories. Of course if you are counting your dollars or working on a shoe string budget you can do a manual submission as well.
A cleverly crafted article will help your pre-sell your product or service and can be a relatively inexpensive and invaluable way of advertising your product or service.
Choose your articles carefully: First analyze the product or service that you are promoting. Ask yourself what would interest people who are likely to buy this product or service. Now create a list of articles you can write which will include information and tips which your potential buyers are likely to find useful. Think of your articles as hooks to grab your potential clients’ interest and draw their attention in the direction of your product or service.
The right title matters: The title of your article will probably play a big role in determining how much traffic is directed to your website. It will have a significant impact on how many people access and read the article. Therefore it is important to ensure that you use the right keywords in your title so that users are interested enough to click on it.
Keep it short: Since most people browsing the net have very short attention spans, it helps if you keep your article as short as possible. Aim for a word count of 400 to 600 words. Make every word count for something. The idea is to pack in as much useful information as possible within your article.
Useful and incomplete information: Your articles should provide useful information which your users can actually apply in the context of their personal or professional lives. However the trick is to leave this information incomplete. The idea is that your article should trigger the readers’ curiosity and leave them asking for more which they can get when they actually buy your product or service.
Your information can be in the form of tips, a tutorial, a step by step guide,
The finishing touches: Proofread your article. Make sure that no typos or other unwanted errors have crept into your writing. If possible get your article reviewed by a peer or colleague. This will help you get a fresh perspective on your article.
Publish your article: Now you are ready to publish your article to ezine directories and of course upload it on your own website. You can use automated article submission services to submit your article. This is an efficient way to submitting your articles. The software will submit a certain number of copies of your articles for a set price to various ezine directories. Of course if you are counting your dollars or working on a shoe string budget you can do a manual submission as well.
A cleverly crafted article will help your pre-sell your product or service and can be a relatively inexpensive and invaluable way of advertising your product or service.
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