Investing 101

Investing involves deploying money toward projects that generate a return, or profit. The type of return you earn depends on what you’re investing in: real estate produces rental income and capital gains; stocks yield dividends, and bonds pay interest. The idea behind investing is to grow the assets you own (i.e., your investments) over time to provide you with the cash to meet your financial goals. Investing differs from saving in that you’re actively putting your money to work, with the implicit risk that the project(s) may fail, resulting in a loss of your investment.

There’s a lot to consider before you start investing, including your own financial situation and your comfort level with risk. But the good news is that it doesn’t require a large sum to get started—you can invest with whatever you have left after paying your bills, and even small regular contributions over time will add up over the long haul.

You can choose to take the do-it-yourself route, selecting investments based on your style and preferences, or enlist the help of a professional. Either way, it’s a good idea to develop a strategy, outlining how much you want to save, how often, and what Investing are appropriate given your needs and objectives.

Once you’ve decided to invest, it’s important to create an asset allocation that makes sense for your goals and investment timeline. This is the percentage of your portfolio that you dedicate to each asset class, with lower-risk assets—such as certificates of deposit (CDs) and short-term government and corporate bonds—becoming more prominent as you near retirement, when you’ll need to shift to a higher-yielding, less volatile mix of assets.

The world of investing often seems to speak in a language all its own, and you might feel overwhelmed by the number of options available. To make it easier, it’s a good idea to narrow down your choices by focusing on the types of investments that align with your financial situation and investment goals.

Once your strategy is in place, it’s time to find a way to put your money to work! Depending on your financial circumstances, you might be able to take advantage of workplace benefits like a 401(k) or an individual retirement account (IRA). If not, you can typically open an online brokerage account for relatively low fees, and many brokers offer tools that let you easily compare different investments and make a selection.

Once you’re invested, it’s essential to stay the course, even in challenging times. Short-term dips in the market can be scary, but if you’re properly diversified and your investing strategy aligns with your financial goals and investment timeline, you’ll have plenty of time to weather the storm. If you have questions or would like help making an informed decision, our team is happy to assist. We can guide you through the investment process, or we can open an account for you through our trusted partners. Contact us today to learn more.