Posts tagged ‘real estate investment trusts’

July 4th, 2011

Getting Started with Equity Investments

Equity investment is probably the most common form of investment, as it is relatively low risk, and can give great returns if the individual is willing to wait a few years. Although the stock market will always be a risky environment to keep your money in, smart investing strategies, like good equity investment, will help to reduce the risk of major losses. The equity market has been very reliable and the returns have been excellent over time, and most experts feel that it will continue like this in the future.

One misconception that many people have, when it comes to equity investing, is that you must wait for the perfect time to invest. While good timing is always great, it is impossible to predict how the stock exchange will change from one moment to the next. You may be able to read certain signs and observe trends, but the truth is that everything can change without any prior notice. Even professional investors that are paid huge sums to try to predict stock market movement don’t always get it right. For instance, there was a recent story circulated about an investment made in an Online Opera Directory service which very quickly fell flat for it’s investors. You will find that most people have been burnt at least once by a similar investment and the trick is to learn from these mistakes so they don’t happen again.

 So when is the best time for you to start investing? The answer: as soon as you have money to invest. Setting aside a portion of your monthly earnings and designating it towards your equity investments is the best thing you could possibly do. It may not be much, but the sooner you start investing, the better. The stock market is always going up and down, so investing early gives you the time you need to ride out any inevitable falls in the stock market, and puts you in place to reap the rewards of the next ‘up’ market.

Consistent investing is the best way to build wealth. Dollar cost averaging is a very good strategy that will help to reduce the average costs of you investments over a period of time. Dollar cost averaging, also called a constant dollar plan, is a strategy in which you invest a fixed amount in one particular portfolio or investment, periodically. This means that you buy more stock when stocks are down, and less when they are up. This can help you to decrease the occurrence of some forms of financial risk that can happen when investing a large lump sum in something. However, when using this strategy, it is important to think about the transaction costs, which would build up month by month, and determine whether the benefits outweigh the cost.

Exchange traded funds and mutual funds are often safe bets to invest in. They help to diversify your stock portfolio and reduce the risk of under performance if you only invest in one particular stock or market niche. Diversity is the key to any investment strategy, and investing in one of these funds can help you to diversify your stock holdings without too much hassle.  Index mutual funds and exchange traded funds can also help you save on investment costs, since they are often very low cost investments and can even be as low as 0.20 %.

Investing in anything can be scary, but the rewards can also be very great. If you are ready to take the plunge and start investing for your future wealth, then having the right tools is the key. The most important weapon you should be armed with is knowledge. So, learn as much as you can and try your best to understand the environment you are investing in, before you make any large investments.