I don’t think I can avoid it any more, so we’re going to talk about investing.  Investing money.  This isn’t a topic that is foreign to me; I used to be a broker and had securities licenses, and lots of clients that had money invested in the stock market, bond market, what have you.  I run a mortgage company because I prefer that kind of investing, but there’s nothing wrong with examining classic investments.  So let’s do this.

There are six things you’ll have to decide.

1. Decide what you’re investing for.  If you’re going to be buying something with your investment inside the next 5 years, then you’re not investing, you’re saving.  And we already covered that.  Investment is a long-term thing, by definition.  You should know your time horizon, because that’s going to dictate what you invest in.
2. Decide when you know that you’re done.  If you’re investing for retirement, you’ll want to compute how big a pot of cash you’ll need to support yourself when you aren’t working.  If you’re investing for a major purchase down the road, determine what that will cost and how much cash you’ll need to buy it.  Know what your target is.
3. Decide what your risk tolerance is.  All investments are risky to one degree or another, and the longer your time horizon, the more risk you can afford to take.  But it’s more than time that matters – your psychological makeup matters as well.  Some people like risk, and can handle the roller coaster, and some get heartburn when the market loses 4%.  Know which kind you are.
4. Decide how you want to invest.  You can invest a lot all at once, or a little over time.  You can dollar-cost-average, meaning that you buy a bit on a regular schedule, whether the market goes up or down.  You can market time, meaning that you try to guess what the market is going to do, buy when it’s down and sell when it’s up. [A tip: unless you are a genius, and do this for a living, market timing will not work for you.]  How you invest determines to an extent the options for #4 below.
5. Decide in what you’re going to invest.  There are a blizzard of possible products you can invest in, from mutual funds to REITs, stocks to bonds, metals to currencies.  You can invest in these things yourself, with a cut-price broker, or a full-service broker.  You can manage the investments yourself, or have them managed for you.  You can use IRAs, Roth IRAs, 401(k)s, 403(b)s, and a partridge in a pear tree.  GET ADVICE.  And don’t get it from Money magazine.  Get it from a person, in person, someone you trust or someone recommended by someone you trust.
6. Decide not to change your mind for at least one year.  Whatever you decide about the above, resolve that you are going to let it ride for at least a year before you make big changes.  You can’t know in a week or a month if what you’ve decided is going to work or not.  Give it some time (see #1 above).  You should have time, so let it work for you.

Investing these days seems riskier than ever, but it isn’t.  It’s always been risky.  The opportunities now are just as good – and maybe better – than they have ever been.  Now, however, it’s easier to see what the risks and the opportunities are, and it is more imperative than ever that you get competent advice from a true professional before you start flinging money around.

If in doubt, save, and invest later.  Saving is never a bad way to go, especially if you’re marking time.  Then, when you make the decisions above, you can have confidence that you’re doing the right thing.

So next week, we’ll talk about some of the investment vehicles, how they work, and what kinds of investors should be investing in them.  Can’t wait.