Grin While Investing in Your Money
December 18th, 2008 |With all of the investment opportunities available, how does the novice make sense of it all? To start with the basics, it’s important to know what type of fund you are investing in, such as Mutual Funds and Hedge Funds. A Mutual Fund is an SEC-registered investment vehicle while a Hedge Fund is a non-regulated investment vehicle. While Mutual Funds only require small, minimum investments, are available to the general public, and are not limited either in number of investors or in number of funds that can be purchased, a Hedge Fund generally has a large, minimum investment required (often around $1 million), are limited to 499 investment partners, and investors must be accredited.
There are lots of great firms to invest with such as CIBC Oppenheimer, Prudential Securities, Warburg Dillon Read, and others. Not all companies invest in Hedge Funds, which are often used to finance the growth of small public companies that are too small for the big investment banks. A business owner in Eugene, Oregon remarked that when they were ready to expand an investment firm hedged their bets on them with great success. Says private investor Isaac David of Oregon, “It may not be without risk, but the payoff can be great!”
When a small company wants to finance a new product line or other strategic growth, they will be considered “risky” by the banks, but analysts at investment firms will look at the bigger potential. In other words, while a bank loan is paid back in interest, in this case a convertible bond would be issued and must at least be paid back in cash; at best the stock will appreciate and the investors stand to earn much more.
Here are some cardinal rules to help the beginning investor:
1. Diversify - your mom told you not to keep all your eggs in one basket? She was right!
2. Think about the long haul - if you think an investment is going to be a get-rich quick plan, get out of it quick!
3. Stay involved - don’t forget to review your situation and evolving needs regularly
4. Timing isn’t everything - you won’t be able to predict the market, so don’t even try. In the long term the odds are in your favor.
5. Stick with it - Remember: this is long term! There will be ups and downs; if you bail each time a stock goes down, you won’t be there for the rebound. Just wait it out!
Laura Welch is an enthusiastic investor. Adam’s articles can be found in leading economic and financial journals, currently she is working on a new financial research and development project about Investors’
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Fully understanding your personal finances can be achieved by using professional finance software or creating complex budgeting sheets to track your expenditure.
