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There it is: $5,000 sitting in your bank account or money market fund. Your mission, should you choose to accept it, is to invest it before you spend it. With 8,200 mutual funds, 2,600 annuities and 9,000 stocks, analysis paralysis sets in. Before you know it, the sum has vanished into the ether, spent on who knows what.
But wait! Roll back the tape. There you are looking at a nifty investment statement and smiling. Your $5,000 is now $6,000 and more. How did you do it? First, know your risk/reward tolerance. Second, match it up with a strategic investment. Finally, take the action and invest.
KNOW YOUR RISK/REWARD TOLERANCE
Willingness to take investment risk is not an emotional issue. It's based on the realities of your personal financial situation. If you need guaranteed income, plan to buy a house soon, have only the $5,000 to invest, you want low risk. If this is "extra" money, you've funded your 401(k), you don't foresee an immediate cash need you can go for the gusto and speculate.
All growth investing involves some degree of risk, but long term investing allows you to wait out downturns and choose tried and true vehicles with long track records. …