The First Secret to Reducing Investment Risk

Learn all you can about investing, but only apply what you feel comfortable with.

Yes you might have a Master's in Business Administration from an excellent university. You might even read the financial section of a newspaper, or pay attention to a financial news channel on TV. But if you are like most consumers, you think investing is complicated, risky and it has all those terms and expressions that you have never heard of.

If you took economics in high school you might have been like me, my teacher fell asleep in class every day (it was right after lunch). In college I avoided an economics class until after I finished graduate school. Then I realized I needed to know something about how financial markets work.

My first professional job was working in a retail branch of Bank of America. I realized knowledge is power. If you teach consumers that the only "safe" investments are passbook savings accounts and certificates of deposits, then they are likely to put all their money in the bank insured by the federal government. The Federal Deposit Insurance Corporation or FDIC insures your money against any lost. The only trouble is, where do they get the money that need to insure banks? From banks, who are charged a fee by the FDIC for the insurance. The banks pass those fees on to consumers in the form of lower interest rates. Plus the FDIC does not have unlimited money to bail out banks.

As taxpayers we all are paying a part of the $700 Billion dollar bail out passed by the Bush administration just as he was leaving office. I know you might be saying, but investing is complicated and risky. Turns out your right, it is complicated, until to take the time learn about how financial markets work and how economic events effects your investments.

Reading a few books on these topics can help you develop a game plan or investment strategy (Wall Street prefers fancy words to keep you confused). Just to make it simple let's call it "My Personal Game Plan for Financial Success". One way to start is with my book, Figuring Out Wall Street, Consumer's Guide to Financial Markets.

Learn the secrets to investment success, develop a simple game plan and stick to it over several years and guess what, you can start your family the road to financial independence.

So if what you learn about financial markets and the products available to invest in might leave you feeling like you are taking on too much risk or it "sounds like too good of a thing". If that is the case, run don't walk the other way.

You should only invest in those things that make you feel comfortable. There are lots of ways to invest, using proven techniques and/or professional managers that can be done simply and with little or no cost to you.

Before investing your hard earned money, always do a gut check does this feel right for me? Don't invest in things you don't understand, will cause you to stay awake at night or leaves your family exposed to financial failure. Your goal should be to make money with your investments, slowly over time. Once you have build a financial foundation, then you can move up the risk pyramid to products with higher returns and higher risks, but only when you have build your foundation and learned enough to make successful investments. The good news is anyone can learn how to be a successful investor.

The First Secret to Reducing Investment Risk

By: Floyd Saunders

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