Financial Planning Test | Types of Investments | What About Risk | How to Reduce Risk | How Much Risk is Right for You? | Buy Low Sell High | What Are You Really Earning | Tips on Building Your Portfolio | Bonds |Bond Mutual Funds | Your After Tax Return | Financial Planners | Tips on Selecting a Financial Planner

Investment Basics

Buy Low. Sell High.

"Buy low. Sell high" is one of the oldest maximums of investing in stocks. But it's impossible to determine exactly the right time to buy or sell.

The best way to gauge a stock's or mutual fund's performance is to compare it to a benchmark. For the whole market, the two indexes most investors use are the Dow Jones Industrial Average ("the Dow") or Standard & Poor's 500 Stock Index ("the S&P 500"). The various industries and market segments also have their own indexes.

What Are You Really Earning?

When you're considering an investment, you need to take into account how the rate of inflation effects your investment. A 10% investment during a period where inflation is 3%, for example, yields only 7%.

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