The following smart investments for young people will help anyone that would like to get off on the right foot to building a prosperous and comfortable life.

Use Self Control: Self control is a skill that is learned. Many people learn self control during childhood, but if you did not, the sooner you can learn the benefits of delayed gratification, the quicker it will be to keep those finances under control. While easy credit allows an effortless purchase, waiting until the money is available offers a better option. Who wants to pay credit card interest on food or clothing that is here today and gone tomorrow.

Set Goals: Without goals, individuals do not have an effective strategy to a secure financial future. Having goals is the key to making the best choices regarding one’s financial future.

Take Charge of Your Future Financially: If a young person does not take time to learn money management, their money will be mismanaged by others. Unfortunately, some of the people are going to be unscrupulous and ill intentioned. They may hope to make a profit for themselves using your money.

Rather than being dependant on others for financial planning, the investor should take time for reading and learning about personal finance. Once armed with this knowledge, avoid letting others catch you unaware.

Keep track of spending: One of the first things to learn is that expenses cannot exceed income. Budgeting is the best way to make the hard choices. If you take time to add up what is spent on coffee each morning, you can start to make small, yet manageable changes in the expenses of everyday living that can have as large an impact on finances as a large raise.

Begin an Emergency Fund: One theme repeated in almost any financial advice is to make the first payment to yourself. Regardless of the amount owed to credit cards or student loans or the amount of your salary, some amount should be set aside in a fund for emergencies every payday.

Start Retirement Saving Now: While retirement seems a long way off, it will be here sooner than you think. The earlier you start saving, the less money earned through wages you will need to invest, and the larger your retirement nest egg will grow. Within a few years, early retirement savers will be working on money that allows the optional plans for retirement and not just the necessities.

Understand Taxes: Because every dollar that is earned is subject to taxes, knowing how they work will let you know what your take home pay will be. This is necessary to see if you are going to earn a living wage.

Guard Your Investments: Insurance is one of the most economical investments to ensure that the money you earn and save does not suddenly vanish. Renters should insure the contents of their homes. Home owners will need home owners insurance. Disability insurance offers protection of one’s ability to earn money.

Characteristics Of Ideal Investments For Beginners

Low Initial Investment and Maintenance: The ideal investment should not require a huge outlay of money as this barrier may prevent the beginner from investing. In addition, there should be a very low cost to maintain the investment. That is where index funds and mutual funds come in. Here are some index funds basics that you should for investing.

Automatic. Young investors do best with payroll deductions to get started.

Transparent Growth. Young investors need to be able to see the money that is being invested grow. As the value of the investment grows, it creates excitement for the young investor. Investments that can be monitored online are often good choices.

Low Risk. While this may be controversial, young investors that have great losses in the beginning can be discouraged from further investing. Higher risk investments can give higher yields and young investors do have longer to recover.

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Growth Investing Defined

When we talk about growth, we are not just talking about any positive % return.  The reason why 2-3% return doesn’t work, even though it is a positive number and technically your money is growing, is because of inflation.  If there is 2-3% inflation every year, than you aren’t making much money.  So even for nominal growth in your investment portfolio, you need more than a 4% growth to make it ‘grow’.

Growth is often paired agains value investing on the other side.  This investing style looks for fundamentally good companies with good business models and financials.  It looks for growth, but in solid companies that are undervalued by the market.

Small Cap Stocks

One of the best ways to get good growth is investing in small cap stocks.  Small caps have room to grow unlike large cap companies like GE or Wal-mart.  Think of small caps as getting in on the ground floor of an investment opportunity.

Small cap stocks are companies that have a market cap of between $300 million and $2 billion.  The market cap is calculated by taking the number of outstanding shares and the share price and multiplying them together.

Small Cap Funds

If you don’t want to go out and look for these individual stocks, you can invest in small cap funds that use this strategy.  If you go the ETF route like investing in the iShares Russell 2000 index fund ETF, it will be relatively cheap compared to a mutual fund and you won’t have to do the stock picking yourself.

If you want to go even further, there are mutual funds and ETFs that have an explicitly aggressive growth investment strategy.  These funds will be very volatile so you need to be willing to stay for the long haul to smooth out it’s dips.

Emerging Markets

If you want to go even further than that, you can invest in small caps in the emerging markets.  This sector of the global economy is growing at a faster rate than the developing world’s economies.  That makes it a tide that is raising all ships.  Likewise, small caps will have more potential for faster and more growth than large cap stocks in this sector.

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Most businesses, small and large, have a 401k plan. If you are self employed, you can set up an individual 401k fund so that you too can save for retirement. It is a simple process to begin. You fill out a form and choose which funds to use for your investing. There are bookshelves devoted to helping you decide how to invest your money but what it all comes down to is time and risk. How much time you have left in your working life and how much risk you are willing to tolerate. The way the stock market works is that you invest in funds and over time, those funds grow. The funds grow because the price of the stocks goes up and at the same time, you are constantly adding to the fund with your contributions.

How quickly those funds grow and to what extent depends on your tolerance for risk. On the one hand, a volatile stock, like gold, could (in the short term) yield a return of ten fold. You invest a thousand dollars and in a short time, you have made ten thousand. But, timing when to sell that stock is the key — gold is notorious for ebbing, so you need to get out of the stock before it falls. Most people do not have the time or talent to play the market in this way. Better to invest in mutual funds, which by their very nature, are less risky because they are made up of many kinds of stocks.

When you leave one job for another, you do not want to lose your hard work. That is where the 401k rollover comes in. By a simple process, you can bring your 401k plan with you to the new job. Many companies offer the 401k to new employees after 90 days or, sometimes, 6 months. When the time comes, you simply fill out the form and send it to your old employer. It sometimes takes weeks or months for the rollover to execute. Generally the fund manager is only going to calculate matching funds twice a year and so the rollover 401k happens during that time. Luckily, during this lull time, your account is still growing; it is just not getting any fresh influx of money from you.

The key to good retirement planning is to have a good grasp of how much money you spend right now (so that you can wisely choose how much to contribute to the 401k plan) and how much you will need for retirement. Once you have these figures nailed down, the hard part is done. Then you let time and the market work their magic.

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What Is a Commodity Mutual Fund?

Commodities are generally things that would be classified as raw materials, natural resources or agricultural resources, such as crops, livestock, and minerals. The supply and demand of these commodities directly affect the value of the investment. It would be wise to study various commodities and their performance over time before choosing which ones you want to invest in. By their nature, commodities are more stable goods that have fewer fluctuations, and fluctuations do not always coincide with those of the overall market, so they perform better in the long run. A committed investor would invest in commodity mutual funds; a person looking to suddenly strike it rich would not be interested in them.

That being said, steady performance by a mutual fund is no guarantee that it will continue to perform strongly in the future. Any investment, be it a standard stock trade, Forex investment, or commodity mutual fund, does carry some element of risk. Commodity mutual funds can be quite volatile at times. However, a mutual fund is generally considered less risky than a traditional stock, but more risky than a bond.

How to Pick a Commodity Mutual Fund

The best way to make a decision regarding commodity mutual funds is to request a prospectus from each company that you are considering investing in. A prospectus will tell you all about the company, including their financial performance, and whether or not investments carry fees or other charges. The Securities and Exchange Commission (SEC) requires that mutual funds publish a new, updated prospectus annually in order to provide accurate information to investors. After reviewing a prospectus, you should discuss your options with a financial adviser or broker to be sure you’re choosing the investment that is right for you. You can also use the Internet to research various commodity mutual funds. Prices are listed as net asset values (NAVs).

Remember that while commodity mutual funds may sound like a good investment, you still should be diversifying your investment portfolio, not investing all of it in commodity mutual funds, or you will be defeating the purpose. Take your time before deciding, and remove emotions and judgment from the equation. For example, when deciding between gold and hogs, don’t pick gold because gold is shiny and pretty and hogs are “dirty” animals. You should only be basing your investment decisions on the performance of the commodity, not what it represents.

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Fundamental analysis looks at the fortunes of a company that issues common stock that individuals and financial institutions may purchase. Fundamental analysis concerns itself with a company’s balance sheet, competition from other companies in the same business, product launches, costs of inputs to production such as raw materials and labor, the effect of macroeconomic trends on the company in question, and really anything that concerns the current and future health of a given company.

Notice that I did not mention the price of a company’s stock, whether it is high or low, trending up or trending down, etc.

Technical analysis looks at nothing except the price of a company’s stock and hundreds of different indicators that have to do with people buying and selling shares of the stock. It is concerned with quantifying all aspects of market activity surrounding the stock, as opposed to the fortunes of the company that issues the stock. Technical analysis in its most basic form has to do with charts of price movements of individual stocks as well as groups of stocks and stock indexes. In addition to raw movements, ‘technical indicators’, often obscure and arcane, have been invented. Technicians use them to attempt to further analyse aspects of market moves, all in the hope of forecasting future price movements with some amount of consistency, through a combination of these indicators.

So if you want to make money in the market, whether through buying stock, buying stock options, ETFs or mutual funds, is technical or fundamental analysis more reliable? Many experts think that one should be aware of both the fundamentals and the technical side of a company and its stock chart.

At the same time, it is true that many experts in fundamental analysis concern themselves only with how well a company is doing when determining whether or not to buy stock or a stock option contract in it, and think that charts are useless tools for the task. Also, many pure technicians have no interest at all in the business of the company whose chart they are analyzing; they think that signals from the charts are sufficient to determine whether the stock should be bought or not.

The argument as to the relative merits of technical analysis versus fundamental analysis will probably never be conclusively resolved. But at least now you’ll hopefully have a handle on the difference between the two.

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One website I personally have found to be very efficient and dependable is Zacks.com and I’ve been using them since 2006. When the opportunity came along to have them as an affiliate, I welcomed them aboard. Zachs is the one site that has become more helpful now than ever especially with the uncertainty of the economy. Their investing research is outstanding, as well as diverse. Zachs has been around since 1988 and has performed well over that time. According to the site, they’re up an average of 28% each year since their start.

As a premium member you have all that Zachs has to offer including up to date e-mails of stocks that you list in your portfolio. Find out about the latest rating of stocks, up to date information about what’s going on Wall Street, Mutual Funds, options, and ETF’s along with their Research Wizard program that will help you screen and back-test stocks that you’re interested in.

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Why Mutual Funds?
The stock market is generally considered the best investment over the long haul, but one of the riskiest, especially if you’re a beginner investing for the first time. No one is guaranteeing your money and the factors that control the price of a stock can be complicated. The pool of billions of dollars from many people’s accounts can support a top notch investing team to make decisions without the hefty price bill of paying for them yourself. Also, a mutual fund is significantly less work than managing your own stock portfolio. Choosing stocks, watching their prices to buy in, watching their prices to know when to get out, and making sure what was a good investment 5 years ago still is can be a full time job in itself. Many people just don’t have the time or inclination to do this properly. If this is you a mutual fund can be an excellent choice.

What to Look For When Buying Your First Mutual Funds?
The first things you want to do when buying a mutual fund, especially your first ones, is make sure they have a long healthy track record. Look for mutual funds that have been around for 20 years or longer. If they haven’t been able to stand the test of time you don’t need them right now. The stock market has averaged around 8-10% per year annual returns. The mutual fund you are looking at should at least have maintained this return over the last 20 years to be in your consideration. Also, look at the worse years the mutual fund has had and see if you can stomach that kind of loss without bailing out.

The second thing you want to look at is the performance of the current portfolio manager; he will be driving the decisions. You mutual fund broker should be able to fish up where this person has worked prior.

The last note of caution is you want to make sure you are well diversified. At least split your investment money into four fund pools. I like small cap, international, blue chip, and commodity.

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1. What is the fund’s goal?
The fund’s goal should match your own. If your goals change over time, you may need to reevaluate your investments. If you invest primarily for growth, your goal is to increase the value of your investment over the long term. If you invest primarily for income, your goal is to receive a regular flow of earnings from your investment. If you invest primarily for stability, your goal is to protect your investment from loss. No investment can maximize all three goals simultaneously. Some funds emphasize one goal; others try to assign priorities among goals; still others try to strike a balance among different goals.

2. What is the fund’s investment strategy?
The prospectus describes the range of securities the fund may purchase, how it selects them, the types of securities it emphasizes, and investment practices the fund may use. The fund’s investment strategy relates to its, and  your goals.

3. What are the fund’s fees and expenses?
All funds must fully disclose their fees and expenses in a table at the front of the prospectus. To make it easy to understand and compare to different funds, all fee tables must follow a standardized format. You must decide if the cost of owning a particular fund is acceptable to you.

4. How are the fund’s distributions made and taxed?
Fund distributions—your earnings—include dividends earned on the investments the fund holds, and any capital gains made when the fund sells investments for more than it paid for them. Funds must make distributions at least once each year. Many shareholders elect to have their distributions reinvested in the purchase of additional shares of the fund, rather than taking them out as cash. It may also be important to you to determine when distributions are made and how they’re taxed. You will be taxed on all taxable distributions, whether you take them as cash or reinvest them in additional shares. Of course, if you sell your fund shares, you may realize a gain or loss which is subject to taxation.

5. How can you buy fund shares?
Some mutual funds offer their shares through investment professionals who provide investment advice, such as brokers, bank representatives, and financial planners. Other funds offer shares directly to investors through the mail, by telephone, over the Internet, or at their own retail offices. Funds may also be offered through employer retirement plans. No matter how or where you invest, mutual funds, unlike bank deposits, are not insured or guaranteed by the federal government.

6. How can you sell fund shares?
By law, the fund must stand ready to buy back your shares on any business day. Depending on their value at the time you redeem, you may receive more or less than you paid for them. Redemptions may be made by contacting the fund company directly or through your investment professional

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