Before you invest your money, you need to decide what degree of risk you’re willing to take and what your goals are. Are you investing this money for retirement in forty years? Or are you saving up to buy a house in five years? A higher risk means a higher reward, but if you will need the money within the next five years, you shouldn’t take a big risk. All financial advisors will help you build a target portfolio, which means deciding what percentage of your money is allocated to high-risk investments, small-risk investments, dividend stocks or cash.
Here is an example: If you are want income and stability you should invest between thirty and fifty percent of your money in big, blue-chip dividend stocks, and the rest of your money should stay in the bank collecting whatever interest it can.
If you are more aggressive about your portfolio growth and more open to risk, you should put at least ninety percent of your money in to stocks, including twenty percent in small-cap equities, which have greater upsides and greater risks.
Most financial advisors will offer you a questionnaire to figure out what your needs are, and before getting yourself in to the market it’s very important to ask yourself when you’re planning on leaving it.
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