Smart Reasons for Investing in Your Financial Knowledge

Here is a question for you: would you invest in stocks and shares if you didn’t know a thing about them? What about other forms of investments? Would you be willing to sink a good portion of your savings into an investment you knew little to nothing about?

Hopefully your answer would be no in all cases. After all anyone could come up to you with details of a fabulous new investment that was a ‘dead cert’. If you believed them you could be set to lose a huge amount of money.

This is why financial knowledge is so important – and yet it isn’t something that is routinely taught when you’re at school or college. That’s why you owe it to yourself to understand and discover everything you can about your finances and prospective investments as you go through life. It’s one thing to see a potential investment opportunity and be interested in it, but it’s quite another to look into it in detail so you know whether or not it really is right for you.

One of the most important lessons of your life

Financial knowledge isn’t something we’re commonly taught. However, it is something we should all learn and keep on building on as we go through life. Without it we can end up making some crucial financial mistakes, and these can be extremely costly.

Make it your mantra never to invest in anything unless and until you have explored it in more detail. This should help you avoid any investments that don’t seem right for you or aren’t as good as the advertising would have you believe. It is also a lesson in developing healthy and strong financial habits that will get you over many of life’s financial stumbling blocks. After all we all come across some of those occasionally, don’t we?

More knowledge equals better opportunities

Of course, as you learn more about every aspect of your finances and the variety of investments available, the easier it will be to choose the best options for your circumstances when you want to make money. We all make decisions based on our knowledge at that particular time, and if we lack in knowledge we can only ever make a limited decision on what to do.

The same holds true when it comes to investments as well. If you have a choice of three investments you can only ever pick the best one out of those three. If you have a wider choice of ten investments, you have more options. You may well choose something far better than you’d have gained from the original set of three options.

As you can see, the more you understand about finances and investments, the more opportunities you will have, both now and in the future. This means you can look forward with more positivity. Even if you have little financial knowledge at the moment, you can choose today as the day to start finding out as much as you can.

3 Good Reasons to Review Your Investments on a Regular Basis

Whatever investments you have – from simple savings accounts to complex stocks, shares and property investments – it is important to review them regularly. As most people are aware, life has a habit of changing on a dime. This means that even if you previously spent time organizing your finances, they may not be perfectly organized now.

With this in mind, let’s delve into some reasons why you should always review your investments from time to time.

1. Life changes – and so do your goals
It’s a good thing to set goals to see if you can achieve them. However, goals change, and if you set a financial goal some time ago it may not suit you today. Furthermore as we mentioned above, life changes too. You may have set a financial goal to save a certain sum of money to help fund a move to another location. However if something happens in your working life this may no longer be a viable move.

2. A financially sound investment may not always stay that way
It’s good to base our investments on carefully researched information that points to the best investment for our needs. However, we all know things change. Even though one particular investment may have seemed ideal a while back, it could be anything but today. If you don’t keep an eye on your investments on a regular basis, you won’t realize if they suddenly become less appealing.

3. You should keep abreast of any investments that are going to come to an end soon
This is another aspect of investing that needs to be monitored. While some investments can be kept long term, others are designed to last for a specific length of time. In this case it makes perfect sense to consider the options you have to transfer those monies to another account or investment opportunity. If you don’t keep track of where your money is or when an investment ends, you will find yourself with a sum of money and no idea of where to put it next.

It’s obvious the best path to take is to check the condition of your investments on a regular basis. If you make it a habit you’ll be far less likely to end up with investments that aren’t serving your interests properly.

As a rule of thumb, you should check your financial position every time something major happens in your life – something like marriage, a new job with a higher salary or even an inheritance. As you can see from the above suggestions, it’s good to make a list of the deadline dates for any investments that are coming to an end.

In the end, if you don’t already review your investments on a regular basis, you should definitely start doing so from now on. Your financial position could markedly improve if you do this, and that is never a bad position to be in. Once you’re in the habit of doing this you’ll never look back.

The Benefits of Locking Up Your Money for Longer

We all know how important it is to manage our money in the best possible way. Ideally this means building up an emergency fund to cover three months’ worth of outgoings in case we should need it, and then maximizing the rest of the available cash we have.

Step one is to go for tax free investments, followed by ones that are taxed by the government. However, beyond this you should think about how long you want to tie up your money for, and that’s the subject of this article.

Why is it worth tying up your money?

The most basic kind of account you can get is an instant access account. This means you can withdraw money whenever you have the need to. It’s a good idea to have one of these; indeed your emergency fund should be in this type of account.

However, any additional savings above and beyond this should be put into another type of savings vehicle. For the purposes of this article we’re not talking about stocks, shares or anything similar. We’re focusing on savings accounts – specifically those that lock in your money for one or more years.

The main benefit of doing this is that you’ll get more interest. In return for giving the bank your cash for the specified period of time, they’ll give you more interest. Generally speaking, you can find accounts that give you fixed interest for a period of between one and five years. If you want to tie up your money for five years you’ll get a rate of interest that is far better than that offered for a two year account.

Points to remember before choosing an account

There are a couple of points to remember here. Firstly, make sure you are willing to tie up your money for a specific period of time. You might be happier agreeing to a two year period instead of a five year period. It may also depend on which other accounts you have and how much cash you are happy to have available for instant access. You may prefer to have six months’ cash put away for emergencies before you tie up some cash for a higher interest rate.

Most of these accounts do allow access if you really need to get at the money, but there is usually a penalty involved. This is typically a number of days’ worth of interest lost. For example, you might lose 200 days interest. As you can see this could amount to a significant sum, depending on how much money you have in the account and what the attached interest rate happens to be.

Thus it is worth thinking carefully about the options available to you and the best accounts to get if you want to spread your money around and tie it up for a better return. Remember – there is nothing to stop you getting more than one account of this type if you want to hedge your bets over several different lengths of time.

Understanding the Concept of Emergency Cash

Many people are focused on the idea of saving for the future, investing in various stocks, shares and accounts and preparing for what the future may hold. However some people completely forget to account for emergency cash in this picture – cash you’d need to lay your hands on in a hurry if the situation ever arose.

What is emergency cash?

Generally speaking, this is the cash that would pay your rent or mortgage. It’s also the cash that would pay your bills and keep you afloat for three months if you suddenly found yourself with zero money coming in. This might sound like a worst case scenario and it is, but it’s the reason why you have to generate an emergency cash fund in case you ever need it.

How would you cope if you lost your job?

This is normally why you’d find yourself with zero income. It’s easy to think you’re in a safe position at work, but plenty of people lose their jobs every month and never see it coming. It’s also the case that plenty of people have made no provision for this type of event – an event that has become more common owing to the worldwide recession.

If you already have an emergency fund, congratulations are in order. You know you have enough cash set aside to pay the bills for a three month period. This means you’ve got three months to find alternative sources of income so you are safe from real financial worries. It’ll still be a worrying time of course, but it won’t be as bad as it might be otherwise.

Resolve to set up an emergency fund today

If you don’t yet have the cash you need, today is the day to start amassing it. There are two main criteria an emergency fund has to meet:

* It has to be in an instant access account
* It has to cover three months’ worth of outgoings

Figure out how much cash you can save into your fund every week or month and build it up as steadily as you can until you hit your target amount. For example, if you need $1500 a month to meet all your bills, you will need $4500 in your fund. If you can save $250 a month towards this target, it’ll take 18 months to hit your target. Even if something happens in the meantime, you’ll have more cash set aside for emergencies than you’d have had otherwise.

Some people dip into their emergency funds for other reasons too. For example they suddenly find they need a new refrigerator and they need to pay for it quickly. In this case they’ll use the money they need to solve the emergency, and then work to replace it as quickly as possible out of their earnings until they achieve their emergency balance again.

As you can see, it is incredibly important to make sure you are prepared for the worst. At least then if it does happen, you are in a position financially to cope with it.

Should You Look Into Unusual Investments?

When you think about investments you probably think of stocks, shares, mutual funds and various other investments of a similar ilk. However you have more options than this, including some rather unusual investment opportunities you may wish to consider.

So let’s focus on some of these now, so you can see whether your interest is piqued by them.


For many people wine is something to be drunk and enjoyed on an evening spent with friends and family. For others, certain choice wines are to be invested in with an eye to the future.

There are certainly plenty of wines that appreciate in value over the years. Of course you have to know your stuff – it’s not enough to buy a few bottles from the local store and put them away for a few years to capitalize on your investment. However if you are willing to focus on learning more about wine – and in particular which wines to look out for and invest in – this could be worth sinking some money into.


The more you know and understand about art, the easier it will be to stand a chance of investing successfully in this medium. This is perhaps one of the more challenging but unusual ways to invest some cash.

However there are some simple rules you can bear in mind. Don’t aim to buy expensive artwork from famous artists. Instead, look for ones who have not yet been discovered. If it turns out you have an eye for the best artists who achieve fame in the future, your investments could appreciate by a significant amount. In addition, make sure you recognize the importance of quality and store your artwork properly so it does not become damaged.


This is another example of a tangible investment you can think about. Memorabilia can relate to investments in lots of different areas. For example you could invest in sports memorabilia, or opt to sink some money into toys from years gone by. You may even find you already own a few things of this ilk that have a value beyond what you originally bought them for.

This often begins as a hobby for many people; indeed there is arguably a lot more enjoyment to be had from investing in memorabilia than there is from investing in stocks and shares.

What could you invest in?

These three suggestions are just the tip of the iceberg when it comes to unusual investments. They should perhaps act as an additional way of investing your money as opposed to being an alternative to stocks, shares and whatever else you invest in. However it is wise to make sure you don’t just view these possibilities as quirks. You need to be sure you apply the same diligent research as you would to any other investment before sinking your money into it.

This is all part of not having all your eggs in one basket. As you can see, it is worth having a few more unusual baskets in your collection too.

Penny Stocks Could Cost You a Pretty Penny

Okay so the title is designed to catch your eye. But if you are thinking about investing in penny stocks it is worth realizing you could lose a lot of money in doing so.

This is not meant as a scare story, merely as a way of reminding you that investing in penny shares doesn’t make them any less volatile or safe than regular shares. Indeed, they are generally even more volatile, which is the reason why they are available so cheaply anyway.

Think about the value of a company before you invest

Let’s say Company A has shares valued at one cent each. Company B has shares valued at $6.78 each. Clearly there is a lot more value in the shares of Company B than those of Company A. This is because penny shares are made available by those companies who show promise for the future. They are created largely to generate funds to put back into the company so it can expand and develop.

Of course we all know lots of companies and businesses fail in their early days. So your task is to invest in penny shares released by companies that have the biggest potential for a great future. Lots of people wish they’d invested in IBM or Microsoft when their shares first came out. They’d be worth a lot of money by now. And when you think about the idea behind penny shares it is easy to see how such an investment can seem extremely tempting.

The reality behind penny stocks and shares

Let’s take a look at the reality of the situation now. The truth is penny shares are affordable for many people looking at getting into the stock market. But they are the riskiest shares of all. You may be able to afford more shares from Company A than you ever could from Company B, but that doesn’t mean it is a wise investment.

The bottom line here is to consider how much you can afford to invest – and also to lose. There is a bigger chance of penny shares nosediving in value and becoming worthless than there is of shares in any other company doing the same thing. There are exceptions of course, which is why you should never invest in any types of stocks or shares unless you know what you are doing and what to expect.

Many people say you should only invest money you wouldn’t miss when it comes to penny shares. There is a lot of truth in this. You should never really invest in it to gain a particular amount of money in return. It is far more speculative than other shares, which is why they are not for everybody.

This doesn’t mean you should avoid them at all costs of course. It just means you should be aware of the pros and cons and of what you are investing in. The more you understand about penny shares, the better your chances are of getting it right.

How Are Stocks Classified?

If you’re just starting to explore the world of stocks and shares, you’re probably wondering how to figure out which stocks to buy and which ones to steer clear of. It’s best to start by looking at the different types of stock classifications that exist, because this helps to divide the stocks into specific categories.

To this end, we’ve listed some of the most popular classifications here. You’ll find you start coming across these terms as you start considering which stocks to invest in.

Small, mid and large cap

‘Cap’ stands for capitalization. To work out the capitalization of a particular stock, you take the volume of outstanding shares and multiply that figure by their actual price. Small cap usually means the capitalization is under a billion dollars; mid means one to five billion dollars and large is anything over that.

Blue chip stocks

This is one phrase most people will be aware of, regardless of whether they have been involved in buying stocks or not. A blue chip stock is one released by a blue chip company, i.e. a company that has been around for a long time and which consistently delivers good results. They may not deliver huge profits but they are seen as reliable and they have far less chance of delivering a loss.

Cyclical stocks

As the name would suggest, these stocks perform well at some times and not so well at others. Take energy stocks for instance. There will be times when there are big leaps forward in this industry, particularly with regard to green energy. At these times you can expect stocks to improve in value. However there will also be times when there is less demand for energy or poor news relating to the sector, and thus the value of stocks will go down.

Defensive stocks

Just as cyclical stocks focus on business sectors that can go up and down, defensive stocks focus on those that are more reliable. Any company that provides a staple item – such as food for example – will typically fall into the defensive stock category.

How can you get the right mix of stocks in your portfolio?

Defensive stocks will be more consistent in their returns than cyclical ones. They are reliable but having said that they won’t produce impressive returns. Cyclical stocks may produce better returns but only at certain times of the year.

Clearly a balanced portfolio is in order if you want to make the most of your returns. It will take time and effort to learn more about the different types of stocks you could invest your money in. However this time is worth spending because you stand a much better chance of receiving a good return.

It is also worth remembering there are many other different types of stocks – hundreds of different classifications – you could delve into. The ones listed here are some of the main ones, providing a good starting point to work from when you are just getting involved in the stock market.

Are You a Knowledgeable Investor?

How much do you know about investing? Many people stick with what they know, rather than trying to expand their knowledge in any way. For instance they might stick with plain savings accounts instead of looking into the potential returns offered by investments in the stock market. They will limit their outlook depending on what they already know, instead of trying to learn more about the potential opportunities available to them.

The question here is obvious – how knowledgeable are you and do you make any effort to expand the knowledge you already have? It’s a bit like going to your local bakery and assuming it bakes the best rolls in town, simply because you don’t have anything else to compare it to. If you started looking a little further afield you might discover a bakery two streets away that bakes the most amazing rolls – far better than your local bakery produces. Wouldn’t you start going there instead to get a better return for your efforts?

It’s all about expanding your field of vision. If you don’t see stocks and shares, you won’t consider investing in them. The same holds true of tax free options and any other investment you may care to think about.

The good news is you don’t automatically have to opt for a new investment you find out about as a result of your exploration. However it will enable you to learn more and take a more educated approach to your investments. You may be missing out on the best investment for your needs, simply because you don’t even know it is there.

You might feel put off by the word ‘educated’. This makes it sound as if the process of learning more about investments is going to be dull and boring, like taking lessons at school. But it doesn’t have to be this way. You can learn as much or as little as you like. If you don’t have any interest in penny stocks, don’t learn about them. If you find you like the idea of investing in long term bonds, start exploring the nature of these bonds so you know what to expect. You’ll soon see you can drift towards those areas of investing that appeal to you, and which might turn out to be profitable for you to sink some money into.

Being a knowledgeable investor isn’t about learning everything there is to know about investing. It’s about letting your interests take you in specific directions. It’s about learning how you can best invest whatever funds you have available in the right areas for you. It’s about developing your own knowledge in the directions that make sense to you. It’s not about following in the footsteps of others or doing certain things because you think that’s what you should do.

So if you feel like you want to develop your investment knowledge, let your own ideas and thoughts lead the way. You might be surprised as to where they take you.

Diversity: the Key Word to Remember When Investing

We’ve all heard the advice not to put all our eggs in one basket. This certainly holds true for investments. If you were to sink everything into one investment and it lost its value, you could lose a lot of money. However if that investment was one of several, the impact on your savings would be far less severe than it would have been otherwise.

So let’s take a closer look at how you can incorporate diversity into your investment plans.

Focus on entirely different kinds of investments

The usual suspects always rear their heads whenever we think about investments – stocks, shares, financial products of various kinds. However there are other options too, such as investing in property, antiquities and collectables and even wine.

It always pays to explore one or more of these areas if they hold an interest for you. For instance wine lovers will enjoy investing in aged bottles of wine; the process will be fascinating to them quite aside from the potential there is to make money in the long run.

Look at your existing investment portfolio to see how diverse it is

This is a good place to begin if you want to introduce more diversity into your investments but you’re not sure how to do it. By looking at your current investments you’ll see which areas you are focusing on and which ones have been ignored, willfully or otherwise. You can then make notes to see whether there are any areas you would like to get involved with in future.

The important thing is to take time to research an area before you allocate funds to invest in it. Diversity is just as much about exploration as it is about actual investment. Don’t choose an area to invest in just because you feel you should or because someone you know is investing in it. Make sure you make logical coherent decisions in order to get the right balance of diverse investments for your own specific needs.

Find out more about other types of investments you haven’t yet explored

You may be happy with the balance of investments you already have. But if you want to be more diverse in your portfolio you shouldn’t just focus on the types of investments you already know something about.

For instance some people focus on investing in stocks and shares, but never think about other kinds of investments such as business and property. There are all manner of possibilities to make your investments more diverse, so make sure you look into all of them – even if you only ever actually invest in a few.

In short diversity is all about maximizing the opportunities you have to make money from the money you already have. Regardless of whether you have just a few hundred dollars or several thousand, the most important thing is to know where to place that money. This is vital if you want the highest returns in the months and years to come.

Another Golden Rule for Investing: No Plan is Set in Stone

If you want to invest money you need to have an investment plan. This much is certain, but you also need to know the limitations of that plan. For example you should know the circumstances that led you to create that plan to begin with. And you should also know what type of circumstances could lead you to revisit that plan with the intention of altering it in some way.

Life gets in the way

Here is an example of what I mean by this. You might have an investment plan that has been created with the intention of letting you retire early. This is all well and good, but supposing you lost your job? What would you do then? You may well have to revisit your plans to see whether they are still valid in light of such a major change to your circumstances. Your idea of early retirement may have to be shelved; alternatively you may be able to put your investments on hold rather than cancelling them and opting for something else instead.

The point of all this is that your investments can work wonderfully for you in some situations. But if those situations change the investments may have to change as well. It is wise to be alert to this fact when you set the investments up in the first place.

Looking for a get out clause

Most people realize the longer they can tie their money up for, the more they are likely to earn from it as a result. But with that said, it is also the case that circumstances could lead you to cancel an investment you were previously very keen on. If you suddenly needed access to more cash because you had lost your job for example, it would be very frustrating to know you had the cash you wanted but couldn’t get to it.

So whenever you think of investing in something new – whether it be property, stocks, shares or any other investment plans – make sure you know what you can do if you needed to get your hands on the cash in a hurry. Is it possible to cancel an investment without getting penalized for doing so? If you are penalized how much will it cost you? Hopefully you won’t need to cancel anything, but it is wise to find out what you can do just in case the time should come.

Revising your plan

If you should need to revise any investment plans you already have, don’t make any kneejerk reactions. Take some time to consider all the options – you may not have to make any adjustments at all. The last thing you want to do is to panic, cancel an investment and then find out later on you needn’t have done it at all. A little time and a level head are the two best things you can have on your side at this point so always bear that in mind.

Is it Too Late to Make Any Smart Investments for Your Future?

It’s often said that if you want to invest in a pension plan for your old age, you need to get one up and running as quickly as you possibly can. This means you have more years to save the amount you’ll need to get the results you want when you’re older.

But does this apply to all investments? For the most part it does. Take stocks and shares for example. We’ve seen many shares take a tumble in value over the past few months and years, owing to the recession most of the world has been experiencing. But if you were to look at the performance of shares in general over a much longer time period, you’d see they were actually performing quite well in the long run.

Time really is in your favor in many cases. So what does that mean if you are in, say, your forties and you’re thinking of making some investments for your retirement? You’d have been better off making those same plans in your twenties, sure, but does that mean there is no point making them now?

Planning for the future

The main thing to remember here is that you must make the most of the time you have left before the target for your investments arrives. So if you are saving for your retirement and you are currently in your forties, you still have a good few years before you actually retire.

However if you delay your plans because you are worried about whether you have enough time to save for them, you will automatically give yourself a lot less time to save. You should know the difference between delaying because you are gathering information about various options and delaying because you are hesitant about whether it is worth it or not.

To be truthful any amount of time you have to make investments in is worth using. The trick is to find the right investment for the amount of time you have available. Some are naturally time limited so you have to find a vehicle you can use that will get you the best return without posing too much of a risk to your cash. We all have different levels of acceptance when it comes to risk of course, so it makes sense to consider where you sit on that subject.

Another option to consider is whether to spread your money around. This can help to negate the risk of any one single investment you are considering putting your money into. But some investments will spread the risk for you, meaning that one vehicle can put your money into several places.

Clearly you have a lot to think about here. However old you are or whatever goals you have in mind, it is never too late to make an investment choice. The nature of the investment you make could differ depending on your age, but there are always opportunities to consider.

What Should You Do When an Investment Dives in Value?

When you look for investments that stand a chance of paying back more than just a meager rate of interest, you will automatically put your cash at a higher level of risk. For example if you buy into stocks and shares you may end up seeing your investment appreciate considerably – or it may take a nosedive, leaving you with less than you had originally invested.

Some investments are designed to run for specific lengths of time, while others give you more freedom over when you can withdraw your money. If your investment happens to be losing money now, what should you do?

Number one – don’t panic

We’ve seen many instances in the past where people have immediately withdrawn all their money – the classic ‘take your cash and run’ reaction. In many cases the people who hung on and sat back to see what happened found their investments returned to near normal soon afterwards. Those who cashed in early lost money, while those who waited didn’t.

Of course this is not guaranteed to happen. But it is definitely worth finding out more about the situation and the likely outcome before you decide what else to do.

Research how the situation could play out

The most important thing to do is not to rely on one single source of information concerning your investment. Before opting to withdraw your cash, make sure you find out the potential consequences of doing so. Remember that reading any news reports concerning the state of any investment are likely to be overly dramatic in many cases. Find out the real truth and base your decision on that.

Consider how long you were going to hold the investment for in the first place

It has long been the case that when it comes to stocks and shares, it is the overall performance that matters. Even in the case of a recession, when the value of shares can drop remarkably, the share value can eventually bounce back again.

If you were intending to cash in your shares or other investments anyway then it may be prudent to cut your losses now before things worsen. But if you were holding onto them for the long haul it may be better to hang onto them even through tougher times.

Remember there is no single solution for all circumstances

It is wise to remember that there is no ‘one size fits all’ solution to handling a weakening investment. You must consider a range of options before deciding which one would be best for you. But the most important thing to remember is never to react to the event without first looking at it from every angle. This will help you to determine whether you are better off cashing in your investment now, or waiting things out to see if or when they may improve.

There is always an element of risk in whatever decision you make. But in reality you could fare better by acting rather than reacting.