Investing 101, Part 1
William R. Gergich, Registered Representative*

Often people approach me and inquire about "making money" by investing. Most people donıt understand the types of investment tools available, and this keeps them from starting any type of savings/investment program. When asked, very few people do their own research. Some rely on professional advisors, others on friends for tips. Some "get lucky" (as they put it), others donıt. I truly believe "luck" has very little to do with it.

Letıs go over the basics. The type of investment strategy that is right for you is one that fits your personal investment objectives, and stays within your acceptable level of risk. For some, the level of risk is the driving force behind their investment choices, for others it is only a part. Determining your risk tolerance is crucial to determining your investment strategy.

Low risk investments offer a greater safety of capital. Some, but not all, even offer guarantees from the issuing company that you cannot lose money. However, with this level of risk, there is a trade off. The lower the level of the risk, generally the lower the level of the return. An example of this is the saving account/Certificates of Deposit at your local bank. Your money is safe, and the return is very low. This level of investing can also include money market accounts, tax-exempt bond funds, and some additional bond funds. These types of investments provide a steady return on your money, and are also called income funds.

Moderate, or medium risk investing is the next level of risk. While not as secure as low risk, the moderate funds are not as volatile as the higher risk funds. These funds can include bond funds, balanced funds (a mix of bonds, common stocks, preferred stocks and short-term securities), and equity-income funds (a mixture of dividend-paying stocks and bonds).

High risk is the most volatile of the investing strategies. This area is primarily composed mostly equity (stocks) mutual funds. Some mutual funds offset some of the risk by incorporating some bond holdings into the fund, within the funds specified limits. High risk investing is not for the one who would not be able to withstand a loss of principal. On the flip side, there is a potential for the greatest returns in this level of investing.

Your investing style and acceptable level of risk can change over time. Meeting with a professional for periodic reviews is just one way to increase your ability to stay on track for your financial goals.

*Securities offered through Ameritas Investment Corp. (AIC), Member NASD/SIPC. AIC and Creative Financial Partners are not affiliated.

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