Investing: What Is An Investment?

How much should be the goal before further investment, with attendant higher risks, is attempted? The answer cannot be given in the form of an exact amount, because your total income and expenditures will have a bearing upon it; but most authorities agree that a "nest egg" or "rainy day fund" must first be obtained which is the equivalent of at least three months' salary.

After that, further savings may be made for investment at a somewhat higher risk. Thus, if you guard against unforeseen emergencies, a program of investment with some degree of security and peace of mind may be undertaken. We must emphasize that no short cut should be resorted to here.

In other words, investment for the person of modest means is a series of steps: the gradual accumulation of surplus cash as a "rainy day" or emergency fund; the accumulation of an additional fund for investment; and the placing of this fund in investments which may entail somewhat higher risks.

The sections that follow discuss some of the types of investments in which immediately necessary funds may be placed with reasonable safety; later chapters discuss investments that carry somewhat higher risks or call for somewhat larger amounts of investment funds.