First Time Investors: Two Industries That You Should Avoid

Making money “grow” is never an easy task. Investing money into a business or an industry does not hurt, but it is important to take your time to research and understand what you are investing on. With proper education and the right direction, making investments can be quite a lucrative option –that is, if you are willing to spend a lot and wait for long periods before reaping the full benefits.

Most businesses usually require a decent amount of finances and good managing to make it successful, others are simply doomed from the start. But if there are two major industries that should be avoided in this day and age, it is the dot-com companies and real estate.

Dot-Com?

Face it, no matter how impressive that team of young, ambitious IT graduates may be, there is no guarantee that they will be coming up with the next Twitter or Facebook. They might, for all we know, but the probability of achieving online success is difficult and so slim that unless you are investing money to buy stocks from an already established company, you might as well burn your money. The internet is a harsh industry; those who make it big earn lots of cash, fast. But everyone else simply sinks to the bottom.

Real Estate

This is not the best time to purchase land. The United States is in recession, purchasing a house now may seem like a good idea because a lot of people are selling theirs for a low price. The reason is that most families are no longer able to afford the mortgage of the average suburban home.

Unless you are an experienced investor, real estate is a very risky choice for solid and consistent financial gain. So even if you see a really tempting foreclosure to jump on to, take a step back and analyze your current position. If you no connections with the local banks or the clerks at city hall, you will not be able to make a sound decision.

Changing Times

Now before you go off blaming the current administration for the continued devaluation of land, or dread about the hostile internet industry, remember that this advice is only good for now. While the situation will certainly not change over the course of the next few months, the world of commerce is ever changing. And that is perhaps the most important thing an investor should have; flexibility -the ability to adapt to the trends of ever changing industries.

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Investing? Start Right and Easy with Mutual Funds

If you think that investing is just for big net worth guys and big – named celebrities (read: Warren Buffet, Bill Gates and Tiger Woods), then you are wrong. There are a lot of ways for people without deep pockets such as you and me. One good way is to invest in mutual funds. This allows you to start on investing even if you are low on money and do not want to take a large risk. You can in fact start investing with as little as $50!

Now, what is a mutual fund? It is a consolidation of money of hundreds, perhaps, thousands of individuals and is invested in various types of securities. This is normally managed by professional managers who invest the collected money in financial securities such as bonds, stocks, or money market instrumentalities. The value of a share of the mutual fund, which is called the Net Asset Value (NAV), is computed on a daily basis and is equivalent to the fund’s total value divided by the total number of outstanding shares for the day.

Mutual funds began in the US in as early as 1924. To date, there are more or less tens of thousand of mutual funds, managed by over 600 different companies across the states and is worth more than four billion dollars.

What is special about mutual funds is the diversity in which it is invested. US laws require that no more than 5% can be invested in a single security for 75% of the total fund. Thus, you are sure that your investments are spread over a large number of investment types and industries. Any businessman would tell you that diversification is the best antidote to falling stock prices. This allows you a buffer should one investment fails. With mutual funds, you get to diversify your portfolio for a small amount of money invested.

Another good thing about mutual funds is the fact that you can start small and grow your investments over time. Other forms of investment options require larger sums of money. With mutual funds, you can start with what little you have right now.

Third good news is that you get professional management services at very little cost. Mutual funds are managed by professionals that do nothing but make your funds grow. It is like hiring a full – time fund manager for a measly fee. You get to sit back and relax as your fund grows. However, make sure that you choose the right company handling your funds. It is good to look at the track record of companies offering mutual funds for the last 5 or 10 years so your get properly apprised of their capacities and profit – generating potential.

Mutual funds usually yield around 12% per annum. This is higher than savings deposit rates. It is thus a worthy alternative.

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