You'll need to figure out on paper your current situation - what you own and what you owe. You'll be creating a “net worth statement.” On one side of page, list what you own. These are your “assets.” And on other side list what you owe other people, your “liabilities” or debts.

Subtract your liabilities from your assets. If your assets are larger than your liabilities, you have a “positive” net worth. If your liabilities are greater than your assets, you have a “negative” net worth.

You'll want to update your “net worth statement” every year to keep track of how you are doing. Don't be discouraged if you have a negative net worth. If you follow a plan to get into a positive position, you're doing right thing.

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It is true that greater risk, greater potential rewards in investing, but taking on unnecessary risk is often avoidable. Investors can best protect themselves against risk by spreading their money among various investments, hoping that if one investment loses money, other investments will more than make up for those losses. This strategy, called “diversification,” can be neatly summed up as, “Don’t put all your eggs in one basket.”

Once you’ve saved money for investing, consider carefully all your options and think about what diversification strategy makes sense for you. There are quite a few investment products to choose from for example; stocks and shares, stock mutual funds, corporate bonds, bond mutual funds and money market funds.

Diversification can’t guarantee that your investments won’t suffer if market drops. But it can improve chances that you won’t lose money, or that if you do, it won’t be as much as if you weren’t diversified.

Risk Tolerance:

What are best saving and investing products for you? The answer depends on when you will need money, your goals, and if you will be able to sleep at night if you purchase a risky investment where you could lose your principal.

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