Investing 101

Lesson 4: Practical Guide for Investors

Life-Cycle Investing

Investing methods are not the same for all people. Obviously, a 20-year-old can take on much greater risks than a person in their 50s or 60s because of the time they have until they retire. Life-cycle investing looks at when you can afford to take greater risks to meet your ultimate goals. When determining your risk levels, be certain that you review all the factors in your total financial situation. Too much risk can result in losing money that you can't afford to lose, but too little risk can result in not having enough money when you need it most.

Alternative Methods to Invest

There is no simple answer to investing. One key question to ask yourself is how much time do you want to spend on all this stuff. If you love reading about the stock market and adore researching companies, then individual stocks and bonds may be your best choice. If you like to follow the market, but don't want to spend a lot of time researching, you might prefer mutual funds. With mutual funds you can research the management team and fund performance, select the funds that make up the best balance for you, and let a professional management team do the rest.

Or, if you want to be able to simply deposit a fixed amount monthly and forget about it, a balanced portfolio, using index funds might be your best bet. Whatever you choose, the key to success is good asset allocation.

In this week's field trip and exercises you'll visit sites that discuss asset allocation methods and practice using asset allocation tools.

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