My assignment this week it to choose how I would invest a fictional 2000 dollars on the condition that I keep it invested for at least five years.
First, I would make sure that I had enough money at home or in a savings account for an emergency. This would mean that I would not have to sell an asset and incur fees or be selling when the market is down. This would probably be around $100-200.
Second, I would invest a certain amount of money in a secure investment, like bonds or CDs. These investments are very low risk, so I can make a better profit if the market goes down than if I had put it all in a volatile investment. I would probably invest about $500 this way.
Then, I would go for the stocks. I would probably invest in mutual funds first, then if I still had money left I would take a more actively managed stock. Using my 5 tips from my previous post, I would invest by diversification and dollar cost averaging. This would be my investment with the highest rate of return but also the most risk.