Investing

It is important that you have the basic knowledge and understanding of finances to invest on your own. Having some sort of knowledge helps you to make wise decision making, even if you do hire a financial planner. Here is a little bit of information that might help you as you begin to look at the area of financial planning. The whole concept is to put your money where it will work hard for you. Risk needs to be minimized but not entirely eliminated. If we look at the long term we will find that small cap stocks have historically grown the most. Whereas, T-Bills and Bank Savings accounts have grown the least. These investments should not even be called investments as they have historically lost after taxes and inflation. That is exactly why we need to take some risk. It is far riskier to guarantee a loss in "safe" investments than it is to take "appropriate" risks, which should give us potential profits. So if we were to take the highest risk, highest potential profit route, we would invest all our money in small cap and even micro cap stocks. These historic returns may not always be in place although I think there is still a good chance for that history to repeat. The one caveat to this historic rate of return is when we examine short periods of time. In short periods, various other asset classifications have faired better (i.e.. bonds, blue chip stocks and foreign stocks). That is one reason why I recommend an asset allocation strategy.

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