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Momentum investors generally seek to buy stocks that are currently experiencing a short-term uptrend, and they usually sell them once this momentum starts to decrease. Essentially, momentum investing generally relies on the principle that a consistently up-trending stock will continue to grow, while a consistently down-trending stock will continue to fall. In the process of the P/B ratio, the share price of a stock is divided by its net assets; any intangibles, such as goodwill, are not taken into account. It is a crucial factor of the price-to-book ratio, due to it indicating the actual payment for tangible assets and not the more difficult valuation of intangibles. Accordingly, the P/B could be considered a comparatively conservative metric. An option is a legal contract that gives the contract buyer the right to either buy or sell an asset at a specified price for a certain period of time.

ETFs are generally organized around a theme, strategy, or exposure, like tracking the performance of an index, such as the S&P 500®1 or Nasdaq composite,2 which are each groups of large publicly traded companies. Approximately half of ETFs today are actively managed, meaning the fund manager actively selects and trades portfolio securities with the goal of outperforming a specific market benchmark or index. ETFs trade on an exchange like a stock, so the share price could change throughout the day. There are a lot of ways to invest money — high-yield savings accounts, CDs, bonds, funds, stocks and gold are all options. The best investment for you depends on investment goal, timeline and other factors. Harry invested in shares of a company, and Jerry chose to invest in the real estate sector, thinking it would give high returns.

NerdWallet, Inc. is an independent publisher and comparison service, not an investment advisor. Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. NerdWallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Our estimates are based on past market performance, and past performance is not a guarantee of future performance.

Exchange-Traded Funds (ETFs)

Arielle has appeared on the “Today” show, NBC News and ABC’s “World News Tonight,” and has been quoted in national publications including The New York Times, MarketWatch and Bloomberg News. Interest, dividends, capital gains, rental and royalty income, and non-qualified annuities are all examples of net investment income. If the investor earns more than the threshold amount, individuals must report the net investment income tax in Form 8960. The form helps in calculating the amount of taxable investment income. The liquidity concept refers to the ease at which a given asset can be converted into cash in terms of time and cost.

ETFs

If that sounds unrealistic, you can work your way up to it over time. If you need some help, you can use tools such as our retirement calculator to help you estimate how much you might need (and how to get there). Let’s say you invest $200 every month for 10 years and earn a 6% average annual return.

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Bankrate does not offer advisory or brokerage services, nor does it provide individualized recommendations or personalized investment advice. Investment decisions should be based on an evaluation of your own personal financial situation, needs, risk tolerance and investment objectives. Investing involves risk including the potential loss of principal. You’ll also need to decide if you’d like to be a passive investor or an active one. Studies have shown that passive investing tends to outperform active investing over time. Investing is crucial if you want to maintain the purchasing power of your savings and reach long-term financial goals like retirement or building wealth.

Your risk tolerance

Most online brokers have no account minimums to get started play plinko and some offer fractional share investing for beginners starting with small dollar amounts. For just a few dollars, you can purchase ETFs that allow you to build a diversified portfolio of stocks. Micro-investing platforms will even let you round up purchases made through a debit card as a way to get started with investing.

Short-term investments: Safe but lower yield

It’s a good idea to shift the money you’ll need in the next several years out of stocks and into bonds and cash. This concept is known as asset allocation, and finding the appropriate mix is an important part of investing. Even the most stable companies’ stocks can fluctuate dramatically over short periods of time. Over the past 50 years, the S&P 500 has declined by as much as 37% in a single year and has risen by as much as 38%. Arielle O’Shea leads the investing and taxes team at NerdWallet. She has covered personal finance and investing for nearly 20 years, and was a senior writer and spokesperson at NerdWallet before becoming an assigning editor.