Putting money aside is not just a financial investment, it’s an investment in you and your future. For this, you deserve a pat on the back!
But when you first start investing, it can seem a bit daunting and confusing. We’ve come up with some definitions and tips that might clear the waters a bit and help you start saving for your ever-growing dreams.
Investing is for everyone. The first thing to remember is that investing is not only for the young or the wealthy. Investments are a tool with a goal of building financial assets. No matter how much money you have or what age you are, everyone can benefit from investing wisely.
Variety of investments. When you think of investing do you instantly think of the stock market? How about investment properties? Maybe you’re thinking of investing in a business venture? There is no reason to box your investment outlook into one area. Consider diversifying — that is, using several different investment vehicles.
Common investment definitions. As mentioned above, there are a wide variety of ways to invest but the most common ones are stocks, bonds, cash, and mutual funds and/or ETFs. Let’s take a brief look at each of these and define them.
- Stocks. When you buy stock in a company you have a little bit of ownership. If the company does well, then the value of your stock will go up and if they do poorly, your value goes down. Stocks are very popular because there is the potential for the company to do extremely well, which would lead you to earning money off of your investment! Of course there is a loss potential as well, but it’s all about evaluating the risk and making smart, informed stock buying decisions.
- Bonds. Bonds and stocks are often lumped together but they are different investments. With a bond you are still investing in a company but you don’t own any part of it, instead they are taking out a loan from you (and all other bond holders) and then paying you back with interest. It’s less risky than buying stocks but may have a lower return.
- Cash. Cash investments are savings accounts, money markets and certificates of deposit (CDs). This is a very safe way to invest but the return on your investment will be low, building slowly over time.
- Mutual funds and ETFs. Mutual funds and exchange traded funds (ETFs) work in much the same way. Instead of putting your money into one company, a pool is created of different companies and different investment vehicles. The thought is that by diversifying the elements in the fund you can find a level of risk and return that is comfortable for you.
Seek advice and keep learning. Investing can be very complex so it’s wise to reach out to a professional for advice on what types of investments to make and how much to put into them. Then take what you’ve learned and keep educating yourself so you can make smart decisions about your investment portfolio.
Now that you’ve got a bit more information, it’s time to get started! You’ll be glad you took smart steps to build your finances and fuel your dreams.
The information in this article is for informational purposes only. It should not be considered legal or financial advice. You should consult with an attorney or other professional to determine what may be best for your individual needs.