Guide to Investing in Any Market

As a down-to-earth investment guide this should put the investment world into focus for you – as a guide covering virtually every investment of interest to the average person.  This is my creation, and its purpose is to simplify and guide you through the investment maize so you can make better investment decisions.

The premise of this simplified guide to investing: virtually every investment you can think of will fall into one of 4 basic investment categories.  The investment that best suits your needs will depend on how you feel about risk and what you want the investment to do for you.  In this guide investment category #1 is the safest followed by #2; and both #3 and #4 involve significant risk … but offer the potential for higher returns.

Investment categories #1 and #2 are commonly called FIXED INVESTMENTS because the investor earns interest and either the principal (amount invested) or the interest rate paid is fixed for the life of the investment.  In categories #3 and #4 both the value of your investment and any income you receive from it will vary; and these are called VARIABLE INVESTMENTS.  Your investment guide to all 4 investment areas, with examples, follows.

Note: Traditional investment theory focuses on 3 three basic asset classes: cash equivalents, bonds, and stocks (which would fall into areas #1, #2, and #3 respectively in our guide).  In recent years alternative investments (our area#4) have received more attention as stocks have not lived up to investor expectations.


Here the value of your investment (principal) does not fluctuate in value; it is FIXED and may even be guaranteed or insured by an agency of theU.S.government.  You invest here for safety and your investment pays interest.  The interest rate paid may or may not be fixed.  For example, in a bank CD both the principal and the interest rate are fixed and do not change for the life of the investment.  In other examples only your principal is fixed and the interest rate paid is subject to change: savings accounts, money market accounts, checking accounts, and money market funds.  As a general guide: this investment area is very low in risk but offers little if any growth potential.  In order to get ahead you need to earn enough to stay ahead of both inflation and income taxes.


In a bond investment only the interest rate is FIXED and it never changes for the life of the investment.  When bonds are issued they have a maturity date, after which time they mature and the bond holder is paid back the principal.  For example, a bond might be issued for a price of $1000 and pay 6% or $60 a year in interest with a maturity date of 2040.  In 2040 the bond owner gets $1000 back.  Up until 2040 the bond will trade in the market and its price or value will fluctuate.  The advantage of a bond investment is the relatively high interest income paid vs. safe investments.  The down side is that if interest rates go up the value of bonds will fall.  Who would pay $1000 for a 6% bond when new ones are offering 8%?  Examples of types of bond investment: Treasury bonds, corporate bonds, tax-exempt bonds, long term bonds, bond funds.


Stocks are also called equities and when you own a stock you have equity (part ownership) and a direct investment in a corporation.  As an owner you accept the risks of ownership and you share in the success and failure of the company.  A stock investment may or may not pay you income in the form of dividends, and dividends can be increased or decreased.  The price of your shares will fluctuate – this is a VARIABLE investment.  Stocks offer both growth and income possibilities and over the past 80 years have returned an average of about 10% a year to investors.  No guarantees.  Examples include blue chip stocks, growth stocks, tech stocks, utility stocks, penny stocks, and stock funds.


Stocks are the investment of choice for most American investors looking for growth and higher returns … but there are many other alternative investment options where you can find investment opportunities.  Sometimes an alternative investment like gold shines when stocks are in the doghouse and up until 2007 real estate was one of the best investment options around.  As a basic investment guide, alternative investments can go up or down in price and may or may not pay some form of income.  They are a VARIABLE investment and involve a higher degree of risk than a fixed investment, offering the opportunity of higher returns without promises or guarantees.  Other examples include natural resources like oil, silver, and foreign securities.  The good news for the average investor is that you can make an investment in these areas today by simply buying specialty mutual funds and leaving the management to professionals.

Any investment that the average investor would want to buy with the ability to sell without delays or heavy costs can be placed into this investment matrix.  That’s because there are mutual funds out there that offer investment opportunities in each of the 4 investment areas.  This investment guide was not designed to tell you which stock or bond to buy.  Rather, use it as a guide for selecting the type of investment that best suits your needs.