Becoming A Millionaire With Stocks And Bonds
Chris Palmeri (Senior Correspondent, BusinessWeek) gives expert video advice on: What kind of stocks and bonds can make me millions?; What steps should I take to make millions in stocks and bonds?; How risky are stocks and bonds? and more...
What steps should I take to make millions in stocks and bonds?
The first step is to make sure you don't have any personal debt, credit card debt and that. You need to get that paid off so that you can start building your wealth. The next step is to, if you work for a big company, many companies have a 401K program and they'll actually match your contributions up to a certain amount. And so by getting them to take that money out of your paycheck and match it you can't beat that, automatically you're making money. Then you look for investments in the program that will offer you low costs in terms of managing the money and diversification and then you just let that pile grow. And if employer doesn't offer that then there are other types of investments, an IRA, a Roth IRA where you can do the same thing, take the money out of your hands and put it in a pot where it will grow without you messing with it too much.
How risky are stocks and bonds?
Stocks in particular very risky bonds less but you can loose a lot of money in both the trick is so often you hear somebody saying I've got this tip, I'll buy this stock and your not thinking about this in terms of a big plan about your portfolio and what you need to be doing. For most people individual stocks and bonds are not what you want to do. You want to be invested in mutual funds in particularly one of the invested in index funds which capture the whole performance of the particular category of the market and so by investing of course all this things you may not be getting the grand slam but you're getting the overall appreciation that automatically market produce and you getting rich slowly.
Can I get rich investing in stocks and bonds alone?
Absolutely, yeah. The trick is to take money aside, put it in a tax deferred account and just let that money grow without messing with it too much. You want to check on it every now and then but you want a diversified portfolio of mutual funds, index funds and take advantage of any sort of employer matching that you may have through a 401K or create an own IRA for yourself and put that money away and let it grow quietly. That's the way to get rich.
What should I consider before purchasing stocks and bonds?
One mistake people make all the time in the market is to buy and do not know anything about it. There is two ways to operate a individual stock. Research it through. Position in the market place. Study growth potential. Buy what you know. You don't want to put all your eggs in one basket. You can think about companies you know and respect.
What tools should I use to make millions in stocks and bonds?
Well the great news is on the internet there's a wealth of information, and it's free for the most part, and you can go to businessweek.com, you can go to Yahoo's financial pages, you can go to VideoJug, you can find a ton of information about investing. You can get all the details you need about the earnings of a company, what it does, who it's officers are, what it's stock price performance has been in the past. You can look at that, and get a comfort level about the quality of the investments you're making.
What are the pros and cons of trying to make millions in stocks and bonds?
The pro is that you eventually are going to be rich because stocks, on average, increase ten percent a year. Some years they can be down dramatically, but if you go back historically they have produced excellent returns. It's the kind of returns that you wake up one day and you say I've got a lot of money all of a sudden. The downside is, they do go down in the short run and you have to be willing to take that hit and stick with it. If you're always chasing, for example, Internet stocks and they take off one year and you put more money in there and the next year you're down and you're out there looking for the next hot thing, say real estate. That's a formula for trying to outguess the market, which is a bad idea. The thing to do is focus on diversification and having your money in a low cost mutual fund. There are ways you can limit your downside. One strategy you can employ is to use what is called a stop order and that way when you've bought a stock, you can say sell it if it gets to this price. By doing that you can insulate your losses because companies do go bankrupt and stocks can go to zero and you can lose all your money. And also you can lock in a certain profit on the upside, if you're lucky enough to get that.