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Investing is one of the most effective ways to significantly increase your assets, ensure your financial security, and achieve your personal financial goals.
Regardless of how much money you choose to invest, first you need to develop a long-term investment plan based on critical factors including: your age and stage of life, personal priorities, and risk tolerance. Each of these factors will ultimately help design an ongoing investment strategy that meets your specific needs.
Following the implementation of your investment plan, you should periodically monitor your results to stay on track with your financial goals and adjust your strategy if necessary.�?

The Fundamentals of Investing
There are different ranges of financial goals. Short-term financial goals may be things you wish to have in a few years, such as a new car or a new home. Mid-term financial goals may include expenses that will occur in several years include college education or a vacation home. And finally, long-term financial goals usually encompass plans for a comfortable retirement and the transfer of wealth to heirs for their financial security.

Investing Strategies

While every investment has inherent risk, some investments have much greater risk than others. Why do some investors choose to take exceptionally high risks? The greater the risk, the more you can potentially gain — or lose. Your risk tolerance is simply the level of investment risk you are comfortable accepting. Understanding your true risk tolerance is crucial for developing and sticking to a solid investment plan.�?

What kind of investor are you?

Conservative investors take only limited risks by focusing on cash, secure stock, and fixed income investments. Moderate investors choose a middle road approach to risk by putting some of their assets into growth stocks. And finally, speculative investors assume high-risk investments with unpredictable returns for the huge potential upside.
Types of Investments top

Stocks — Equity investments that give you an ownership share in a corporation.
Bonds (Fixed Income Securities) — Loans that pay interest over a fixed period of time.
Understanding Bonds and Bond Funds

Mutual Funds — Diverse equity funds that pool money together from many different investors for greater buying power.
Futures — Obligations to buy or sell a specific commodity at a preset price on a specific day.
Options — Rights to buy or sell a specific item (stocks, bonds, etc) at a preset price during a specified time period.

Asset Allocation

Asset Allocation is how you choose to divide your investments between stocks, bonds, mutual funds and cash equivalents. Determining your appropriate asset allocation depends on your financial goals, your timeframe to achieve them, and as always, your personal risk tolerance.
Asset allocation is critical when developing an investment strategy because it integrates the strengths of different kinds of investments to improve the likelihood of desired returns. For example, if your stock investments decrease in value, your bond investments may offset this loss with a comparable gain and balance out the volatility in your overall portfolio.Diversification
As the next level in asset allocation, diversification is a method of further spreading your investments between the major asset categories of stocks, bonds and cash equivalents. For example, instead of just investing in your company’s stock, you can invest in stocks of many different industries, sizes and styles. Again, this diversification helps you decrease your investment risk and improve your chances of desired returns.

Understanding Risk
Unfortunately no investment is risk free. Still, without risk there would be no reward. As an investor, it’s important to understand the key causes of investment risk:

Volatility — The more volatile an investment is, the more often its value can swing up or down, sometime dramatically. While you can earn a bigger profit since the spread of what you paid for it and what you sell it for can be significant — you can also lose a lot of money if the stock value dips.
Demanding high yield — During slower economic times, many investors seek the same returns they enjoyed when times were better. By purchasing lower quality — and often unknown stocks that promise higher returns — many investors are vulnerable to increased losses.
Playing it too safe — To avoid risk, some investors choose only the safest fixed income investments such as CDs or Treasury Bills. While the volatility of these tools is minimal, overly safe investors could potentially outlive their savings due to the pace of inflation against the relatively low return rate of their investments.
In addition to investment risk, there are other outside risks to be aware of including: market risk, currency fluctuation, inflation risk and political turmoil.
Risks Associated with Trading Outside of Normal Market Hours
1. The price paid or received may be different from the price paid or received for the same security during normal market hours.

2. The price paid or received may vary between the different market centers that trade securities.

3. Investors may receive partial executions of their orders, or no execution at all.

4. The spread between the “bid” and “ask” price may be wider than the spread during normal market hours.

5. News announcements may have an exaggerated impact on the price of securities.

6. Increased volatility exists when trading outside of normal market hours.

Risks Associated with Trading in a Volatile Market
1. To lessen the exposure of extraordinary market risk, many firms including Legg Mason Wood Walker, Incorporated (”Legg Mason”) temporarily switch from an automated system for executing client orders to manual execution of such orders. Additionally, the size guarantee with respect to the execution of client orders is reduced. The reduction in size guarantees often results in partial executions of client orders.

For example, a client enters a market order to buy 1000 shares of ABCD when the best market price is $ 10 1/2 per share. Upon receipt of the client market order during normal market conditions, the executing broker-dealer’s automated system would execute the entire 1000 shares at $ 10 1/2 per share. During volatile conditions, however, the executing broker-dealer manually executes 100 shares of this client’s 1000 share order at $ 10 1/2 per share, and then executes the remaining 900 shares on a best efforts basis. In this scenario, the client might receive 100 shares at $ 10 1/2 per share and 900 shares at a significantly higher price per share.

2. A market order is defined as an order to buy or sell a security at the best available price. Hundreds or perhaps thousands of market orders may be entered by clients during volatile market conditions. Additionally, the executing broker-dealer that receives a client market order may be attempting to effect several other client market orders contemporaneously. The increased volume during volatile market conditions often results in order routing and execution delays. Accordingly, clients entering market orders may receive an execution price significantly away from the best market price at the time that such market order was entered. This is particularly evident during the volatile market conditions surrounding the trading of initial public offerings.

For example, the initial public offering of the internet company ABCD has been priced by the underwriting broker-dealer at $10 per share. The brokerage industry and the media have indicated that ABCD will trade significantly higher once the company is released to trade in the public market. The client enters a market order to buy 100 shares of ABCD. The first public trade occurs at $ 25 per share and the client receives an execution of such order 15 minutes later at a price of $35 per share.

3. A limit order is defined as an order to buy or sell a security at a specific price or better. Due to the reduction in size guarantees by executing broker-dealers and due to the large number of limit and market orders entered by all clients collectively, clients entering limit orders may not receive any execution whatsoever, even though several other clients were able to receive executions at the same price as the limit order.

For example, a client enters a limit order to buy 1000 shares of ABCD at $25 per share when the best market price is $24 per share. Upon receipt of the customer limit order during normal market conditions, the executing broker-dealer would offer price improvement to the client limit order and execute such order at $24 per share. During volatile conditions, however, the executing broker-dealer may have several market and limit orders ahead of the client’s limit order. Accordingly, there may not be enough shares available for this client. As a result, the broker-dealer may not execute the client’s 1000 share limit order despite several other clients, however, who received executions at $24 and $25 per share.

Although it is possible that a customer limit order will not be executed, customers entering limit orders may substantially reduce the risk of receiving an execution significantly away from the best market at the time that the order is placed.

4. Due to the delays in order routing and delays in executions during volatile market conditions, some clients have attempted to cancel their initial market orders and enter new orders. The cancellation order is canceled when the market receives the cancellation, not when the client enters the cancellation order. If the client enters a new order before receiving confirmation that the cancellation was actually processed, the client may be responsible for the execution of duplicate orders.

5. Volatile market conditions may result in a trading halt of a particular security or a trading halt of the entire market. When such a trading halt occurs, client orders are sent to the market, and unless the client indicates otherwise, orders are held in queue until the trading halt has been lifted.

6. Clients should confirm the subject security’s margin requirements before effecting a transaction. Many firms including Legg Mason have raised the amount of equity that must be maintained for certain volatile securities in margin accounts. The increased maintenance margin requirements reduces the likelihood that the Firm will have to liquidate assets in a client’s account in order to meet a margin call.

How to get started!

If you would like to get started on your personal investment strategy, first carefully define your short, mid, and long-term financial goals, stage of life, and tolerance for risk. Next you need to structure a flexible investment portfolio with the appropriate asset allocation mix for your specific needs. Unless you have the time and experience to closely follow and analyze market performance, we recommend that you work with a professional Financial Advisor to develop and implement an effective long-term investment strategy as well as monitor your results. Evaluating these results is critical for keeping your investment strategy in line with your financial goals.