I just got my tax returns and it's a nice chunk of change (for once) I want to invest it in the stock market, mutaul funds, and the money market but with the rise and fall of out economy...well I have know clue if it's a good idea, basically I don't want to see my money decrease after invested like the crash that we just had. I don't really know much about the increase and decrease of the way things are going. Does anyone think it's a bad idea? and why?
Due to the liquidity of the stock market every share is priced at the point where about half of investors think it will go down and about half think it will go up.
Nobody really knows what the markets will do short and long term and trying to time your investments to take advantage is always a gamble. Back when the Dow was at 2,500 I was convinced that our market was overvalued and the Japanese market was even more so. I thought a major market correction was imminent so I pulled every cent I had out of the stock market. The market went through the roof while I sat on the sidelines. I also lost a lot of money following the experts; in fact; the best long term strategy seems to do the opposite of what most people are doing.
Unless you like to gamble the best long term strategy seems to be invest based on your goals and needs rather than the market. Dollar cost averaging seems to be one strategy that does slightly better than average long term.
I'd point out that if you have any debts you should take care of them first because it is unlikely your investments will pay more than you pay in interest. Also, if you don't have an emergency fund, setting aside the equivalent of a few months of pay in a money market is probably the best use of your refund.
Whatever you do good luck!
Before dumping any money into the stock market, I'd strongly recommend getting a basic "finance 101" type education. Tons of good books on the subject.
See, stocks are good, if they go up...average (over long term) from most stuff you read will be 8%. However, if five years ago, you dumped all your money into Apple stock, you'd have made WAY more than 8% annual return.
Thing is, though, that 8% as a "target" is possible a few different ways. Consider looking at supplemental health insurance, and instead of a regular plan, a health savings account - if my wife & I had done that the last 4+ years, we would have more than 20,000 in an account, instead of the zero we have after paying for the standard insurance, even after paying for the supplemental health insurance.
And, life insurance (I know, not a fun subject) can be a very, very good financial instrument, if leveraged properly. You have to consider your age, the time you want to retire, if you'd rather pay the taxes NOW or the taxes at the time of retirement, etc, etc.
I've read a half dozen books on various things...and, it's pretty scary, but, if you at least get the basics of an education together, then you're far more likely to do well, than if you simply pour money into it & hope for the best.
GET ADVICE from a financial advisor....or if you're really serious, then start watching the stock market and hang onto your money until you have some understanding of what all you're seeing.
Let me say this, too...aske around about financial advisors...there are bad ones and there are great ones. I've been lucky, I have a great one, plus I have a husband who has an inate ability to understand the in's and outs of the stock market...
You will find at first a very real language barrier...you'll need to be able to understand exactly what they are talking about. Watch MSNBC's business channel...they talk stock all day long, every day...but it helps learn the language.
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Stock market is a market for trading shares, derivatives of a company and commodities.