12: Before Soaring Into The Skies

Learning how to invest is getting your money to work for you, instead of you working to get the money! What were sure about is that you need the money to achieve your retirement goals, so make certain that your investment targets are measurable and reasonable and your goals: specific and quantifiable as well. Earning money in the form of interest, dividends, and capital gains from investments is actually one of the best (and more rewarding) ways to making ends meet when you retire. The sooner you begin to invest, though, the greater the amount of capital available to you when you need it most.

Moreover, if you are over 50 you will be able to take advantage of special tax deductions on investment expenses. Capital gains and dividends are taxed at just 15% (5% for taxpayers in the lowest income tax bracket); and these types of income are not subject to Social Security or Medicare taxes. Additionally, expenses such as the fees you pay for investment advice or accounting services are deductible provided that they, along with other itemized personal deductions, exceed 2% of your AGI. Other deductible investment expenses may include attorney fees; safe deposit box fees; subscriptions to investment newsletters; fees for online services; home computers used for investment purposes; and fees you pay to a broker, bank, trustee or similar agent for collecting investment income such as your taxable bond, mortgage interest, or dividends on shares of stock. You may not, however, deduct fees that you pay to a broker to acquire investment property, such as bonds or stocks. Only when you sell can you add the fee to the cost of the property and recoup your expenses. Phew, that was long!

When it comes to investing in stocks, the stock market returns an average twelve percent per year in the long-run, and even though your stocks will not necessarily be classified as liquid assets (you must also understand the significance of liquidity in fluid times) - we nonetheless advise you to invest in stocks for the highest returns. Check the rates of return on other investment options over the years if you don't believe us. Now!

In fact, stock trade should work rather well in taking care of your monthly cash requirements along with your annuities, etc. It is strongly recommended that you put only 18-20 percent of your capital into short-term investments and the remaining 80 into reliable, long-term investments that promise to back you if ever that rainy day arrives.

When playing the stock investment game you will realize that there is no dearth of strategies, methods, plans and theories to help you get to the top. But, there is no guarantee that all of them will work all the time. Nevertheless, you ought to keep certain basic concepts fresh in mind if you're living in the world of stocks.

Also remember that diversification is key. As clichéd as it sounds, do not put all your eggs in one basket. If your money is heavily concentrated in one or two sectors or one or two stocks - and that part of the market tumbles, sadly so does your money. Invest, therefore, in a mix of different kinds of companies. Another cliché to help you bear in mind that you must be diversified is: the best offense is a good defense.

Besides all that, you must have a plan to sell your stocks. Usually when a stock has been skyrocketing, investors feel greedy and hope that the stock will go up further. And when a stock has been nose-diving they could be tempted not to sell and instead wait for it to soar somehow. But if you have a plan to refresh your portfolio by selling stocks and buying others, you can be disciplined and thereby lose much less. In other words, do not gamble; rather apply discipline to make the maximum amount of money through your stocks, and wisely so. Aren't we wise?!

Also, you must trust in divine intervention when you are ready to trade in stocks. (Don't sound so wise now, do we?!). Well we'll give you a hint of guidance: Gold stocks were up 489% between 2000 and 2003. Interested?

A last piece of advice: do not make it a point to disregard all inexpensive stocks. Value investing is worth considering and similar to shopping for a bargain. Some companies with superior marketing strategies may be allowing their stocks to go cheap, and sometimes it's profitable to stack up on these stocks. In view of that, closely inspect their earnings, yields, dividends and assets as well as how capable their managements really are. (Don't worry; you will have plenty of time to do all this after you retire!). Understand that consistent or gradually rising earning rates are good, and you would also do well to look at the competitors of companies that are engaged in selling low-cost stocks. The great thing about these stocks is that when and if they plummet, there is a dependable limit to how much you lose. Your objective is to gain while keeping your money safe. So, be as clever as possible (like us!) and enjoy your trade!