Your Best Investment
The best investment for your neighbor might not be your best investment. Take any investment advice he may have with a grain of salt, because personal finance and money management issues are personal in nature. In other word, your neighbor is likely not in the same financial position you are. He might have a bundle of cash in search of investment opportunities. You might not be in that position.
For example, if you are younger and carry heavy credit card debt plus a mortgage, you’re probably not looking for investment opportunities. You’re trying to keep your head above water. Your best investment is to pay down your credit card debt whenever possible. Where else can you make/save 15% or 18% interest without risk?
If credit cards are not a money management problem for you, you might consider paying off your mortgage early or making larger payments on it. But this could be a major personal finance mistake … if you leave yourself without an adequate cash reserve to cover emergencies, like losing your job. No cash reserves means you can’t pay the bills; and you can’t borrow money if you don’t have a job.
If you anticipate or fear money management and cash flow problems in the future, consider refinancing your mortgage at lower interest rates if you have equity built up. Pull out enough money to earmark as a cash reserve in case the worst happens … like job loss, medical emergency.
Once your personal finance house is in order and you no longer sweat paying the bills, you’re ready to look for some positive investment opportunities to build wealth. I have some investment advice for you in this department. Don’t rely on friends and neighbors for advice. And don’t search for that perfect investment that promises high profits with little risk.
Start investing in mutual funds. Put together a portfolio of money market funds, bond funds and stock funds. Start slow and easy and keep your cost of investing low with no-load funds. Your best investment from here on out is to invest time and effort to learn investing basics.
Mutual funds do the money management for you. But you need enough financial knowledge to be able to pick the funds that are appropriate for you. Let your neighbor share his investment advice, but make your own investment decisions based on your personal financial needs.
By: James Leitz
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Filed under Investing by on Jul 7th, 2010. 