Investing
First, pay off debt.
If you're paying 12% interest on a credit card, and getting 0.3% interest in savings (as of March 2005), you're paying 11.7% interest in order to "feel good" about having money in investments. Even if you're getting 10% on your money, you're still losing 2% on your money.
What are wise investments?
- Retirement accounts
- 401k's
- IRA's
- Company stock purchase plans
- Long term stock investments - after you've paid off debt and put all you can into your retirement, 401k, IRA, and company stock purchase. And long term means decades, not months.
Choosing stock
As yourself these questions:
- Is this a company that I'd like to do business with - would I buy their product?
- Is it a stable company?
- Does it have strong track record of gaining value over long periods of time? (Decades not months)
- Can I afford to lose all of the money I'm putting into this stock - remember Enron?
- Once I invest, the money will be tied up for a long time, do I need this for other things?
Then be willing to leave the money in the stock for a long time, even if it may dip in price a bit.
It's far more costly to pay fees to move your money around that you'll lose in a minor stock dip.
It's better to pay close attention to the eggs in your basket than it is to diversify so much that you don't have a handle on whats going on. Many people say "don't put your eggs all in one basket". I believe it's a good idea to spread your money out, some in bonds, some in stocks, some in CD's, etc., but don't go overboard getting into dozens of stocks. Pick a few strong performers and stick with them.
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