Hope for your financial life and beyond

High Risk Investing: When I Turned One Thousand Dollars Into…

I marvel at how Wall Street creates wealth. This even happens sometimes through high risk investing. An investor purchases a few 100 shares in a small company that hits it’s stride or a start-up that goes supernova and they become a millionaire inside a decade.

high risk investing

That’s not normal. For most investors it takes multiple decades of steady, solid investing to create significant wealth. But it does happen from time to time, as we all have seen.

That’s why the latest opportunities or fads like cryptocurrency and NFTs attract us. It’s why we get caught up in new companies and try to buy in on the opening day of trading. IPOs (initial public offerings) tend to be extremely volatile. That is why investors are better off waiting for several months before they decide to purchase shares.

What if you could purchase shares in a company before it went public though? That would be an extreme level of high risk investing. You are essentially putting money into a company that might not even make it to market. That strategy is more like speculating than investing.

But would you do that given the opportunity? Put money on the line with a chance to hit it big or lose it all? I did once and here’s that story.

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Living is Worth the Risk – So Choose to Live!

Ugh…Wow! That’s the basic starting point for describing 2020 to most people. A year that FDR might say will live in infamy. If you would have told me in December of 2019 that for most of the next year we’d debate whether leaving our homes or not was worth the risk, I would not have believed you.

worth the riskYet here we are at the close of 2020 and there are some who have not left their homes since February to protect themselves from contracting COVID19.

There are so many angles people have pursued and will continue to pursue to try and make sense of what happened this year. There will be facts, there will be opinions, there will be misdirection and there will be suspicion. And all of it fueled with emotions we know so well – fear, anger, frustration, anxiety, confusion, sadness and helplessness. Who hasn’t felt at least one of those at some level in 2020?

And yet, despite all the downside this year has brought, I had a thought several months ago while driving with my family that I have not been able to escape. It gave me perspective on how to handle my life in a world consumed with risk. It showed me there is a better path than the one governed by fear.

The thought was a basic one. Put simply, my mind told me this – “Living is worth the risk.” Here is what that means to me.

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What to Invest in When You are Scared to Invest

There are times when the stock market causes real fear for investors. It’s scary to see the markets and your portfolio value go down day after day. This is especially true for those closer to retirement. At times like that, it’s hard to know what to invest in or whether one should be investing at all.

what to invest in

You can’t discount the power of fear. Even the most seasoned investors get it from time to time. However, those who have been investing for a long time know something that perhaps a beginning investor doesn’t know – fear is not necessarily an excuse to stop investing.

But fear could be something that prompts you to reevaluate what to invest in. Market downturns are a great time to look again at your portfolio and analyze your strategy. Every time I’ve done that, it has actually served to calm me down. It reminds me that I am following sound investing practices that will serve me well in the long run.

There is good news if you are scared of the markets and don’t know what to invest in. There are a couple simple strategies to follow that can help you sleep easier at night. Here are several to consider that will help you put your fears to rest.

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A Comprehensive Look at Auto Insurance and Why You Need It

Today I’m continuing my insurance series with a detailed look at auto insurance. So far I’ve tackled the big giants of health, life and homeowner’s insurance. Auto insurance is no less important and remains an important piece to a well-maintained insurance plan.

auto insuranceThe reason?

You are going to wreck your car and cause damage. In fact, the car insurance industry estimates the average driver will file a claim for a collision every 17.9 years. So a 16 year old with a new license can anticipate having one accident by age 34 and another by age 52 and yet another by age 70.

But auto insurance is not just about recouping monetary loss for a damaged vehicle. There are also people driving and riding around in these cars that get into these accidents.

These people get injured.

Many even die.

The losses you could face from medical bills or the potential lawsuits resulting from these accidents could bankrupt you.

That’s how serious finding the right type of auto insurance is for your financial security.

What Is Auto Insurance?

Just like all the other types of insurance, auto insurance is a contract you agree to with an insurance company. In exchange for a monthly premium you receive coverage from the insurance company in case of an event.

In general, auto insurance offers protection against these issues related to your car:

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Investing Made Easy (Part IV) – How to Choose a Mutual Fund

how to choose a mutual fund

Wall Street – the great creator of wealth

By nature, I hate risk. Sure, I know on occasion circumstances demand or persuade me to accept more than I desire. In those instances, I’m way out of my comfort zone. Yes, it can be exciting, but I would much prefer life grant me slow, boring, predictable moments that are within the scope of my abilities and emotions to handle. That’s my personality.

It’s also why many people hate investing, especially when it comes to learning how to choose a mutual fund.

“Mutual funds are boring investments,” they say. “I want the sexy action of the newest individual stock.”

“Mutual funds are slow,” they say. “I want investing performance measured in days or weeks, not years.”

“Mutual funds are predictable,” they say. “They mostly track the performance of the general market.”

To “they” I say, “OK.” If that is your risk tolerance, more power to you. But I won’t be recommending a seat on that roller-coaster ride for investors, especially beginners. Too much risk, too little diversity for someone just starting out.

In part three of this series, I introduced the investing term “diversification.” Diversification means to spread our money around. When we diversify, we don’t put all of our hard earned dollars into one specific stock. By placing money in different investments, we protect the whole, should one of our investments falter. It’s the #1 reason mutual funds are the best place for the investors – because even by only owning one fund, you get instant diversification. Here’s how.

What Is a Mutual Fund?

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Investing Made Easy (Part III) – Where Should I Put My Money?

where should i put my moneyIt is easy to get confused when you ask the question, “Where should I put my money?” I felt overwhelmed when I began to research my first investments. Over time however, I’ve learned this doesn’t have to be complex. In fact, the best principle is to keep it simple. Always invest in things you understand and could explain to someone else. The simplest strategies are often times the most rewarding and the most calming on the investing nerves.

In this third installment of my Investing Made Easy series, I’ll tackle the “Where should I put my money” question. Before that however, I need to ask you a question. How much risk are you willing to take? The answer to that question will determine the direction your investing dollars go.

Managing Risk When Investing

It’s risk and the thought of losing money that keeps people up at night. Tossing and turning. Sweating. Eyes wide open, mind processing what might happen the next day in the market. I’ve been there as an investor and it’s no fun.

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Investing Made Easy: The What and the Why

Target on moneyWelcome to the Luke1428 investing series. Over the next couple of weeks I will be unraveling the world of investing and setting you on a path towards long-term success. Success in our personal financial life is something we all shoot for and investing can help us hit the target. This series will be a primer for the beginning investor and a reminder for those of us who are more seasoned as to why we invested in the first place.

There are many reasons why people choose to ignore investing. I remember first delving into this topic in my early twenties and feeling extremely overwhelmed. I would glance through a brochure for a mutual fund I was considering and didn’t understand most of what I read. I felt uneducated and uneasy. And I didn’t know anyone who was knowledgeable enough about the topic to explain it to me. There also were no really cool personal finance blogs to educate the public then either.

Mostly though, I remember being afraid of losing money. I was old enough in 1987 to comprehend that something terrible happened to the U.S. stock market on October 19th. I didn’t exactly know how people made or lost money investing, but I knew that Black Monday sounded bad. The people screaming and sweating on the nightly news looked bad. And a $500 billion paper loss in one day seemed to make people feel real bad. So if that can potentially happen, why should I risk losing my money through an investment in the stock market?

This investing series will give the answer to that question and others like it that I had to figure out for myself when I began. The topics I will cover include:

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