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Investing For Your Future.why Should You And How Exactly?

Jan 21, 2008
Investing is one of the easiest ways to prepare for your future. Every year, millions of people get married and start families. What they don't do is take the time to plan for their future. When you are young, the future seems far away and it seems like it will be long before you need retirement. The truth is, the years pass quickly and retirement can sneak up on you. One day you are twenty something, just starting out, getting married, having children, and in the next breath you are forty something with nothing saved for the future. Those years can pass in the blinking of an eye and suddenly your future is staring you in the face. So many people charge head on into their lives without making sure that their future, and their children's future, is financially 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.

An Investment Fund Defined And investment fund can have several advantages over an individual stock portfolio. If you invest a portion of pooled funds among retail investors, firms do the work for you, retain a small fee, and this reduces the risk the investment carries among the pool of investors. The funds come from many small investors and are used to make large investments, so individual investors have much less risk but with access to many more types of securities then they might otherwise be able to have. Not only does this reduce risk, but it cuts down on high trading costs. It also lets the small investor with just a small amount of money to invest begin to save. Two different types of investment funds are available. These are mutual funds, which are open-end, and investment trusts, or closed-end.

What a Hedge Fund Is Hedge funds are investment funds that are not open to most investors. In most cases, only institutions or individuals who are wealthy use hedge funds. With hedge funds, you can use strategies of investment that are typically more aggressive than those used with mutual funds. As a hedge fund investor, you can sell short, do program trading, arbitrage, swap, use derivatives or leverage. Hedge funds are also not held to the same strict rules and regulations as mutual funds are. Legally, hedge funds are restricted to having no more than 100 investors per fund. Therefore, the average minimal investment that is usually required is very high. In general, investments are roughly in amounts of $250,000 to more than $1 million. In addition, although the typical management fee is paid as with mutual fund investment, for example, there's also an additional charge of 20% of profits, which goes to managers.

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.
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