We include 7 types of investments to consider. But first, what are investments and how can they help me in the pursuit of my dreams? Investing means that an individual commits money to a financial asset or security in hopes of gaining substantially more in the future from it. I say in hopes because there are no guarantees. Other substantially larger investments could potentially grow bigger but these have more risk associated with them.
Come out of your comfort zone
I am learning about investments more and more. I am coming out of my comfort zone with it. One of the biggest things I am learning is to spread your money out in different ways to assist with your longterm financial goals. Don’t put all your eggs in one basket is the most common good advice I am getting. Dividing the investments up with some tried and true safety nets, some higher risk, and some nontraditional forms is a good way to increase your monies over time.
Planning for your future
Investments are very important to those who are planning for retirement in the future. Once people retire the amount of income goes down depending on the career path chosen, years vested, and contributions. When you retire you will need other forms of steady income for the rest of your life. What will they be for you? The more you contribute now the better you will be then. For most, financial freedom is the biggest concern. You don’t want to retire and then discover two years later that you won’t be able to survive and thrive, thus putting you back into a workforce.
So many people in their 60’s and 70’s are having to go back to work due to poor financial planning. Now that’s perfectly fine if you are doing it because you enjoy doing it and it’s not a necessity. A lot of people are so used to working that when it comes to retirement time they become depressed and withdrawn from society. Sacrifice now and plan for your success.
7 Types of Investments to Consider
Bonds– The bond is a debt security, under which the issuer owes the holders a debt and (depending on the terms of the bond) is obliged to pay them interest (the coupon) or to repay the principal at a later date, termed the maturity date.
Stocks– Known as a share or equity of a company that allows investor participation in the company’s capital. Stocks have more risk involved and should be approached methodically. There are lots of resources available to help you with your future financial needs and wants.
Mutual Funds- This is a mix of stocks and bonds. Mutual Funds are a pool of lots of investors for different companies. It can be actively or passively managed. There are many of the same risks as bonds and stocks. Risks could potentially be lower because the funds are diversified.
CD (Certificates of Deposit)– Very low-risk investment. Money is given to a bank and earns interest over a certain predetermined time period. The longer the time period the higher the interest rate earned.
ETF ( Exchange Traded Fund)– These are purchased and sold on the stock market. They are a group of investments similar to mutual funds. The values fluctuate during the trading day. ETF’s are said to be good for new investors because they are diversified.
Retirement Plan– Most commonly attained through the workplace. 401k is a good example. This plan is contributed by the employee and the company matches a certain amount. The 401k is best for the employee to contribute as much as they will allow because the company’s match is equal thus earning a lot more in the long run.
IRA (Individual Retirement Plan)– This is on your own without a business contribution. Many people are finding themselves doing these on their own because some company’s don’t offer it. The benefit of having an IRA plan is that you won’t pay taxes on the investment until you retire. At that time you will more than likely be in a lower tax bracket so you would pay less on taxes.
Money markets and savings accounts are good to have as well but are not the type for significant growth. They are considered to be for safekeeping.
It is recommend to create a good financial portfolio for your future.
Additionally, it’s a good idea to have bonds as a part of your portfolio because there’s lower risk involved. They typically don’t have as much earning potential as other investments, but having them as a part of your portfolio helps with balancing risks. Look at it as a safety net.
There are many more types of investments that can be explored. Get a financial planner to help you map out your future financial needs.
Bonus:
Passive Income- this is income that doesn’t require much work to generate or maintain. A good example of this is rental property.
Conclusion
Take the time and do the homework on investment strategies. Getting started may seem overwhelming now but once you do you will be happy you did. Your financial future will be better equipped. Start with putting money in less risky places first to get your feet wet, then as you learn you can start making more calculated financial contributions.
