Where Can I Invest?

by: Daniel P. Matthews

Mutual funds and real estate are the two most practical places to hide your money. Each of these options provide a solid foundation on which to build your financial independence. Remember, the effort is to create strategies for the beginner. Certainly other options, such as fine art and futures can bring real rewards. But, as a beginner your focus should continue to be setting in place those strategies most likely to safely and understandably lead you to financial independence.

First, lets look at real estate. In America, owning your own home is the dream. Just as important, it is the bedrock of your financial record. You know credit companies look to your credit report for an indication of your ability to repay loans. The most indicative loan is the mortgage. It matters not whether the house is a condominium or a single family tract home or a custom built mansion. What matters is whether you have paid according to the agreement, over time. It is very important.

But, you might argue, real estate has been relatively flat in recent years. This is true. But, when inflation sets in real estate moves with it. Real estate during times of inflation provides the hedge necessary to protect your money. When inflation settles, as it did in the early 1990's, you might very well be able to refinance your home, remove equity and reinvest that money in growth funds.

Mutual funds are the second attribute of your financial independence foundation. Most people acknowledge that the stock market provides great opportunities to acquire additional wealth. You probably wish you had bought a stock when it was $5 or $10 and watched it grow to 10 or 15 times its original value. Such success stories do exist.

Next, you should read the discussion about the following two questions.

How has real estate performed?
How have
stocks performed?

Last, you need to understand another attribute regarding achieving financial independence. Choosing individual stocks is time consuming and narrowly focused on one company, thereby raising your risk level. On the other hand, when you buy mutual funds you do not necessarily chose the individual stocks in which you invest, rather you buy pieces of many companies at one time. If you want to understand why mutual funds are an important building block click here and you will discover the answer!

Hopefully you understand what you must do to put yourself on the road to financial independence. In the navigator bar you can click on the Charles Schwab Investing Classes and get the information you need to open the door to learning about investing in mutual funds and stocks.