The process of investment planning, the basic rule to saving for the rainy day with proper planning, is researching, finding, and adopting certain effective strategies to invest well, in order to create and accumulate the kind of resources and wealth that you wish to have for later in life. All planned investing behavior is goal driven, and specifically personal investing is driven generally by two overall goals:
Creating financial resources and wealth
Conserving financial resources and wealth
Or a combination of the two
Sadly, not a lot of people have a clear understanding of their goals and go about investing haphazardly, without any kind of a plan. In order to make sure that you are saving for the rainy day with proper planning, research the options available and consider the services of qualified CPAs. Think of planning as a step by step process that has many elements.
Set investment goals
Understand your personality with regard to investing
Design the right investment portfolio
Evaluate various market and investment options
Select specific investments that are suitable for you
Manage and monitor your portfolio regularly
Rebalance and redesign your portfolio as and when it is needed
The various investment options may include one or more of the following:
CASH: consists of bank balances, currency, coin, negotiable money orders, and checks of all kinds. Keep only enough cash to meet your regular living expenses and hold the rest in cash equivalents. These are relatively safe, short-term investments easily and quickly convertible into cash. Various types include
certificates of deposits
checking accounts
commercial paper
GIC
money market accounts
T-Bills and so on
Cash equivalents are safe and highly liquid but each variety has its own strengths and weaknesses. The degree of risk varies.
STOCK: A stock is an equity security. If you hold one or more shares of stock in a company, you actually own a small piece of the company. Stocks are sold to raise money for expansion, debt pay off, and operating capital. The percentage of ownership is based on the number of shares held, as a percentage of total shares issued. Stocks generally give higher returns than bonds or cash equivalents. However, consider the risks before investing. Various types include
aggressive growth stocks
American Depository Receipts
common stocks
growth stocks and more
BONDS: are loans, or debt instruments. You loan money to a corporation or to the government, and they pay you regular interest over time. Bonds can augment current income while keeping your principal safe and diversifying your investment portfolio. A wide range is available, including
agency bonds
asset-backed bonds
bearer bonds
callable bonds
municipal bonds
zero-coupon bonds etc
REAL ESTATE: this type of investment includes direct and indirect investment in buildings or land and generally has a higher potential for gains, as capital gains, tax credits, and rental income. Options available include
Real Estate Investment Trusts
real estate partnerships
rental property etc
MUTUAL FUNDS: an investment company pools money from various investors and invests in stocks, bonds, or securities. The money is managed by a professional fund manager. A bond mutual fund produces capital gains, while stock mutual funds provide capital growth and dividend income. Other types include
balanced funds
equity-income funds
growth and income mutual funds
natural resources funds and so on
INSURANCE-BASED INVESTMENTS: are issued or underwritten by an insurance company. Consider type of products, advantages and disadvantages and tax consequences of each before investing.
Some of the other instruments for saving for the rainy day with proper planning are
hedge funds
derivatives
options
commodities
futures
Before investing any sizable amount in any way, consult an expert, CFP, attorney or a CPA.
c 2008 Anna D. Banks, GCDF
Anna D. Banks, a passionate advocate for baby boomers in exploring their priorities, planning and setting goals for the next stage of their lives. Assisting her clients to attract and build a professional and personal life consistent with their values is not just a goal of Anna?s, it?s her passion. Her diverse work experience in business, education and financial services enables her to help the diverse population of baby-boomers with their life, career, and personal finance coaching needs. Anna is currently Adjunct Faculty at Essex County College, where she teaches Career Development & Management.
Author?s Note:
Do you have any questions about career development or lifestyle changes for Baby Boomers, which you think others, like you, would want to know the answers? Please place a post on http://www.annabanks.com or email your questions to me at Anna@AnnaBanks.com
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