Tips on How Best to Invest Your Money

Tips on How Best to Invest Your Money

Tips on How Best to Invest Your Money      

For the average investor, a good tip for investing your money is to invest across a number of different mutual funds with each asset allocation of a mutual fund being the key to investment success. Choosing the best asset allocation strategy is very important when picking the best mutual funds to invest in. Here we look at how best to allocate your money in mutual funds: stock funds vs. bond funds vs. money market funds. These three main categories of mutual funds offer investors the best investment portfolio that satisfies their individual financial objectives. The average investor could invest in all three types of mutual funds in order to meet their savings and investment needs at various stages of their life. A quick and easy way to establish which category of mutual fund suits your needs is to determine how long you wish to save/invest for. If you wish to save for one month to one year, we would recommend that you invest in a money market mutual fund. However, if you intend on saving for between one and three years, a bond fund would be most suitable for you. Finally, if you wish to save for longer than three years, then we recommend an equity or multi-asset fund.

Money market funds are by far the least risky of the three types of mutual funds and typically offers higher rates when compared to a standard savings account. However, like all investment funds, these funds are not risk free and are exposed to reinvestment risk. Given the maturity profile of money market funds (30 - 365 days), reinvestment risk is higher in a money market fund than in a bond fund. On the other hand, a money market fund benefits from a rising interest rate environment.

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