Tips for investing wisely:
- Define your investment goals.
- Learn as much as you can about the risk involved in the various types of investments.
- Diversify your investments. This will minimize your risks.
- Always remember investment is a long term strategy. Do not respond to sudden changes in your portfolio with knee-jerk reactions.
Long term financial health requires creating a financial plan that includes investing. When considering your investment options keep in mind investments are intended for long term financial gain. There are many ways to invest your money. Below you will find some common investment terms.
Bear Market- A time when stock prices are declining and market sentiment is pessimistic. Generally, a bear market occurs when a broad market index falls by 20% or more over at least a two-month period
Bond- A debt security, similar to an IOU. When you buy a bond, you are lending money to the issuer. In return for the loan, the issuer promises to pay you a specified rate of interest during the life of the bond and to repay the principal when it "matures," or comes due
Bull Market- A time when stock prices are rising and market sentiment is optimistic. Generally, a bull market occurs when there is a rise of 20% or more in a broad market index over at least a two-month period
Capital Gain- The profit that comes when an investment is sold for more than the price the investor paid for it
Compound Interest- Interest paid on principal and on accumulated interest
Diversification- Diversification is a strategy that can be neatly summed up as "Don't put all your eggs in one basket." The strategy involves spreading your money among various investments in the hope that if one loses money, the others will make up for those losses
Dividends- A portion of a company's profit paid to shareholders. Public companies that pay dividends usually do so on a fixed schedule although they can issue them at any time. Unscheduled dividend payments are known as special dividends or extra dividends
Mutual Funds- a company that brings together money from many people and invests it in stocks, bonds or other assets
Stock- An instrument that signifies an ownership position (called equity) in a corporation, and a claim on its proportional share in the corporation's assets and profits. Most stocks also provide voting rights, which give shareholders a proportional vote in certain corporate decisions, such as the election of corporate directors
Portfolio- The combined holdings of stocks, bonds or other assets owned
* Definitions supplied by the Securities and Exchange Commission via www.investor.gov.