by Effie Moore Salem

Created on: August 19, 2008   Last Updated: October 04, 2010

Investing wisely is every investors dream and the successful ones will tell you it is not easy but with foresight and imagination it will pay dividends. Wise investors stop dreaming and start learning the many reasons to invest and reasons to not invest. Your hard earned money will now be returning money to you and in turn it will be wisely reinvested in more money making ventures. How do you do this?

You learn how to invest, what to invest in, when to invest and how much money you can risk. When you first start out you set aside money that you can afford to lose and you invest that. Investing wisely does not allow for rash judgments and gambling tactics. Over time and with good faith in your ability to make the right decisions, you will be buying stocks and not limiting your investments to bonds which you believe to be safer.

Bonds are not always the safer means of savings although once they were thought to be. That belief came about because the government has been the biggest issuer during times of crisis and they normally have been safe. To protect yourself when dealing with the bond markets you research the company asking to be loaned the money. A bond is a debt owed you by a company or an organization. You agreed to loan them money under certain conditions and after an announced plan of time you would be paid back the money loaned plus extra for the use of your money and your patience.

The key to substantial return on you bond investments is knowing how they work. Unlike stocks you are not placing your money on a wholesome company and gambling on their continued good fortune; with bonds you are lending money to a state, a city, a government or to another country to help them finance some much needed service. This can be road construction, new schools, war finance, or whatever. You are allowing them the use of your money because you believe in their foresight and their good intentions.

How can you lose? Bonds are subject to interest rates. You are guaranteed full value of a bond if you hold it unto it matures, but until then the interest on your loan could lose you money if the interest rates rises. In other words should you need to sell you would be losing money on your initial investment. Learn how to read the rating scales and learn what grade your intended bond purchase has made on Standard & Poor, s, and other bond grading systems. The grade of a B, as an example, would be a do not buy signal.

Stocks work differently. When you buy a stock you are

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