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Why Should You Invest for Your Future?

Mar 2, 2008
Investing can be one of the best and easiest ways to prepare for your future. Every year, many people get married and start families. However, they also have to take time to plan for their futures, and oftentimes, they don't do that. If you're young, the future seems limitless and it seems like it will be a long time before you get to retirement. However, those years can pass quickly and retirement can be here before you know it. One day, you are in your 20s and just starting a newly married life together, having children. All of a sudden, you're 40 and you haven't saved anything for your future. Those 20 years or so in the middle can pass just like that and all of a sudden, that distant future is right here, staring at you and daring you to take care of it. Still, many people continue mindlessly on in the same direction they've been going, and they don't stop to make sure that their own and their children's financial futures are secure.

The Consumer Federation of America and Princeton University conducted a study wherein they found that roughly 70% of American households with yearly salaries under $50,000 had saved less than $5,000 for retirement. Similarly, that report also concluded that most Americans were just getting by, living from paycheck to paycheck. If you invest, this doesn't have to happen to you. When you invest, you put money away that grows effortlessly, so that when you reach retirement age, you have something to live on. If your investments are wise, your nest egg will be quite comfortable upon retirement. While it is true that any type of investment carries some risk, different types of investment securities have different levels of risk. You can find an investment vehicle with a relatively low risk level. For example, mutual funds are considered relatively low risk while individual stocks are considered a higher risk. In addition, you have other investment options; your options are many and varied, and you have a lot to choose from.

What are Investment Funds?

Investment funds have several advantages that individual stocks don't. When you pool the funds of retail investors together, their risk is reduced, as is their amount of effort in managing the investment. Investment firms retain a small fee. Mutual funds generally come from many small investors. This setup allows small investors to access a wider range of securities that they might not otherwise be able to. This also cuts way down on the cost of trading. It's also easier for smaller investors to participate. There are two types of investment funds. One is an open-end fund, or mutual fund, and the other is a closed-end, or an investment trust.

What Is a Hedge Fund?

This type of fund is typically not available to the average investor because of the income bracket one has to be in to participate. It's also more difficult to invest, and you must know much more about how the stock market works. In general, institutions and wealthy individuals use hedge funds because they have investment strategies available to them not available to the typical investor. These strategies are more aggressive than those used in mutual funds. Hedge fund investors can do program trading, leverage, sell short, arbitrage, swap, or use derivatives. Additionally, hedge funds do not have to follow the same regulations and rules that mutual funds do. The law restricts hedge funds to a maximum of 100 investors per fund. Because of this, the minimum investment amount for hedge funds is usually extremely high. In general, average investment amounts for hedge funds range from about $250,000 to more than $1 million. A management fee is paid as with mutual funds, but hedge funds are different because managers are also given a percentage of the profits, usually around 20%.

If you haven't started saving for retirement, it's never too late. Whether you're 10 or 20 years away from retirement, beginning to invest wisely now can give you some healthy retirement income by the time you're 65. If you invest, you'll be able to enjoy your retirement years without having to worry about your finances.
About the Author
Mark Plummer is a UK based independent Offshore Investment advisor.Has been involved in the financial services and financial planning business since leaving full time education.Before you decide how you want to invest your capital please visit this Investment Fund
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