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The Problem With Investing

Stocks in this article: GOOG MA SBUX MCD KO

An investment class could get young minds thinking about savings and retirement -- well, at least a few anyway. They would realize the power of starting early, because even $50 or $100 per month would go so much farther than most people realize. Instead, many wait until they are finally making "good money," however that's defined, before they start saving for retirement.

These mistakes go on to cost almost everyone thousands of dollars and plenty of unwanted stress. But eventually most contributing citizens catch on: We all need to save. The big question is, how do we do it?

Naturally, the stock market is one of the first places investors turn. While the young high school students have decades to save and reap the benefits of long-term capital gains -- and the time to suffer through big drawdowns -- older investors have areas and strategies that will interest them as well.

The stock market is the one place that almost any investor can turn to: Growth investors, dividend investors, aggressive investors, conservative investors or simply those looking to preserve their capital.

There's a lot of things investors need to do to figure out exactly how or what they want to invest in -- such as their age, time frame, risk tolerance, goals, etc. -- but there's one important facet they should all be focused on: Quality.

Higher quality is generally associated with less risk. Think about it in relation to buying a car. You can either buy a 25-year-old car with 150,000 miles on it, or a relatively new car, with low miles.

While the 25-year-old beater could last a lifetime with only minor tuneups, (high reward), there is a much more likely chance it will break down often and end up in the junk yard, (high risk).

The new car on the other hand will likely last a very long time, while providing consistency and dependability. Because we have to pay more for this scenario, it offers a slightly lower reward, while substantially reducing the risk.

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