Investing

What many people are not aware of is that when you are investing money you are actually saving money, meaning that investing is actually saving. But just because you are saving money through investing that doesn't mean that everything is risk free. In fact when it comes to investing you usually face some kind of risk because you are putting your money into an account that is going to offer you some kind of a return. The worst thing that can happen is that you end up losing all of your money, which means you don't even get to have the money that you invested in the first place.

When you are investing your money the good news is that you get to choose where your money is going. This means that you can put your money into an account that is going to offer you a high return or you can put it in an account that offers you a low or medium return. What you need to know about this is that if you are investing in the high return accounts you are facing a bigger risk, meaning that you have a higher chance of losing your money but you if you are earning a return you are going to make a large amount of money. With the other accounts you are safer investing in those because the accounts are not as volatile so you don't run the big risk of losing all of your money, but at the same time the return you are going to be earning on your money is going to be a lot less than with the high risk accounts. But if you are looking to save money on investing you should consider investing in the lower risk accounts, as well as following a few other useful tips.

Here are some tips that you can follow to save money on investing.

Tip one:
Think about opening a Roth IRA. You can do this even if you have a traditional 401(k) plan because most companies will not offer you a Roth Ira, they only offer the traditional 401(k) plan. Not to mention the fact that there is no limit to the amount of retirement accounts or savings accounts that you can have open for investing purposes. But the best thing about a Roth Ira is that any money that you put into it will grow completely tax free. This means you won't owe any money now or in the future when you cash it out for retirement. For example if you put in $5,000 each year from the time you were 25 to the time that you retired at 65 and earned an annual return of 8% on your money, you would have $1.4 million saved. This means that you would be able to retire with $1.4 million to spend on everyday living expenses, but if you put that money into a taxable account you would only have $1 million if your earnings were taxed at 15%. This means that you would have 28% less money by the time you retired.

Tip two:
Enroll in a 401(k) plan. Enrolling in your company's 401(k) plan is a really smart choice because of the fact that you are going to be deferring the taxes that you are paying on your contributions. What this means is that you will not have to pay taxes on the money that you are setting aside into the 401(k) plan until you take the money out of your account. A great example of this is if you are putting in $200 per month you are only going to see a $150 less in each paycheck if you are in the 25% tax bracket. This holds true if you are contributing to a traditional 401(k) plan, if you are putting the money into a Roth 401(k) plan then you won't get any tax breaks up front but you will be able to withdraw your money tax free once you have retired.

Another huge benefit about contributing to a traditional 401(k) plan is that most employers offer to match your contributions. What they offer to match is going to depend on the company that you work for. Some will offer to match dollar for dollar that you put in up to a certain amount, but others will offer to match half of what you put in. But even then a fifty cent per dollar match is still like getting an extra 50% return on your money.

Tip three:
If you are using a broker to help handle your investments the first thing that you need to do is to look to see what they are charging you to help you with investing your money. The chances are good that your full service broker is charging you a huge commission each time you make a trade. In fact on average full service brokers will charge you around $50 to $150 on each trade. But even then some brokers might offer you something that they call "free trades", but what you need to think about is that with these guys nothing is really free. These "free trades" are usually offered in exchange for a percentage of your assets. For example if you have an account of $50,000 and they are offering your free trades in exchange for 1.5% of your assets each year you end up paying them $750.

So what you need to think about is getting rid of your broker, especially if you don't trade very often and if you don't really listen to your brokers recommendations. If this is the case you can actually do better with a discount broker, which they only charge you between $10 and $40 for each trade, which is a lot less than what full service brokers charge you. This can lead up to a savings of hundreds of dollars each year.

Tip four:
Rather than trying to time the market, which for the most part is a losing game, what you are going to want to do is to employ a very simple strategy of dollar cost averaging. How this works is that you are going to be investing a fixed dollar at regular intervals you will be able to smooth out the ups and downs of the market over a period of time. Not to mention the fact that you are going to be taking all of the emotion and guesswork out of investing which will make it much less stressful and you will also be more successful.

Tip five:
Even if you are self employed you can still save money on investing and can save for your retirement you just have to do it yourself. So if you are self employed you can use a solo 401(k) program or other IRA options to help you save for retirement.

Tip six:
Where many people end up losing money is when they don't know when to get rid of their shares, otherwise known as unloading your shares. If you don't when when to unload your shares you can end up losing the money that you have invested and the money that you have earned on your investments. Basically if you hold on to your stocks too long it could become a loser, but if you get rid of it too early you can miss out on superior gains. What you need to do is to learn what to look for so that you can boost your chances of making a good decision with your stocks, which can save or even make you some money. Two things that you want to look for are a change in the company's fundamentals and how the stock is performing in relation to its peers.

Tip seven:
Rather than investing in stocks you should think about investing in bonds. The main reason for this is that if you invest in bonds you actually have an escape that is not available to people who invest in stocks. The escape is that if you invest in bonds you won't have to pay federal taxes on the interest like you do with the interest on stocks. And if you muni bonds from in-state issuers you can avoid state and local taxes as well as the federal taxes. For example a 4% yield on a muni is the equivalent of a 5.6% payout on a taxable bond if you are in the 28% tax bracket and 6% if you are in the 33% tax bracket. Not to mention the fact that most bonds that you can invest in a relatively safe, in fact muni defaults have been rare over the years.

Tip eight:
Investing in dirt cheap index funds and exchange traded funds is an inexpensive way to invest wisely. The reason for this is that index funds simply track broad swaths of the market and they don't try to pick the best stocks. Because of this investors usually come out ahead of most actively managed mutual funds. So why not join them and start saving money rather than losing money.