Investing For The Future - Diversify Your Portfolio
No one knows what may happen to change the current Financial scene
, but your money has the best chance of growing if you put part of it into a diversified portfolio of stocks or stock mutual funds. Over a 65-year period, from 1926 to 1990, the average annual return on common stocks was 10.1 percent, compared to 3.7 percent for U.S. Treasury bills, 4.5 percent for long-term government bonds, and 5.2 percent for long term corporate bonds. Small-company stocks returned an average of 11 .6 percent. In general, stocks of small companies returned more than those of larger companies, although they involve more risk.If you can't sleep at night worrying about the ups and downs of the stock market, then choose more predictable and conservative investments, such as municipal bonds or bank CDs.
But remember, over a long period these investments probably won't keep pace with inflation. And make investments for the long term, not because you expect the market to rise (or fall) over the next year or so.Market values of stocks always rise and fall over time, so don't panic and sell when the value initially falls. It's also wiser to choose investment vehicles for their return rather than for tax considerations.
Differences in investment results generally outweigh any tax savings. Furthermore, tax laws change, and you don't know what the law will be when you decide to cash in your investments. But if two investments appear equal, then tax considerations might tip the balance. It's important to keep your acquisition expenses possible, and you can do that by buying no load, that is, without a sales charge, mutual funds. Select funds that have no loads, no redemption charges, and low expense charges.Unless you are an expert who can spend 40 hours a week studying investments, don't try to decide what individual stocks to buy. Stock mutual funds allow you to invest in a diversified portfolio of many stocks, under the management of investment professionals. Be cautious in dealing with stockbrokers and others who get a commission on the investments they sell. They can provide helpful information, but don't expect them to be completely objective about the investments they recommend or too concerned about possible losses.
by: C. Clark
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