Investing is a strategic way to watch your money grow. Think of investing as a way to increase your capital without working 24/7. With investing, your money will work harder for you. In order to be a smart investor, you need to fully understand where your money is going. The last thing you want to do is to wake up in the middle of the night wondering where your money is!
Before you begin investing, you need to ask yourself what level of risk you’re comfortable with. Your comfort level will most likely be based upon your age or experience. The closer you are to retirement, the less likely you want to play around with big chunks of money. However, for those who have years to grow in their career, then some level of risk may be fine. Before you invest in anything, make sure you fully understand the terms and what you’re putting on the table.
Whether you’re an investing newbie or a self-declared pro, it’s always a good idea to review the basics. While there’s no one right way to invest, there are plenty of things to consider. So if you’re ready to make the next move with your money, keep reading. Here are four investments to consider adding to your portfolio.
1. Real Estate
Yes, the real estate market can be unpredictable. But before you skip over this one, know that real estate investment is much more than just buying up properties and flipping them. While that’s one component of it — one that is often glorified on HGTV — there is much more to real estate investment. You can put your money in a real estate investment trust or invest in commercial properties.
Another way to dive into real estate is through co-ownership. This removes the obstacles individuals are faced with when buying real estate on their own. By purchasing properties together as a group, you feel more secure in your buying decision. Unlike timeshares, the group owns the property and each member has an equal share of the property. If you and some friends are talking about investing, this may be a great way to start learning about the process together.
2. Retirement Accounts
This type of investment may be one that you’re familiar with. Retirement accounts are good options for individuals looking to save up for the future. If you’re a full-time employee, your company may offer a 401(k) plan. Essentially, this plan is sponsored by your employer and allows you to contribute pre-tax dollars. Your company might also match a certain percentage of your own contribution, which furthers its growth.
Another type of retirement account is an individual retirement account. There are three types of IRAs: traditional, roth, and rollover. The type you go with depends on your current employment status and financial situation. Because life after work is expensive, many individuals have both a 401(k) and an IRA. Having both is a way to supplement what your employer is able to contribute while also leveraging additional investment options.
3. Certificates of Deposit
Yes, CDs are an outdated way to listen to music in your car, but they also relate to the financial sector. CDs are bank-issued savings, and they typically earn more interest than a traditional savings account. To invest in a CD, you will give the bank or institution a set amount of money. Once the CD term is up, typically after three, six, or 18-months, you will get the money back plus interest.
There are a few things to consider with CDs. First, you want to make sure you don’t need the cash before the term is up. While you can get the money out of a CD before it expires, you will face a penalty. Second, you need to understand that you may not make as much money with a CD as opposed to other investments. CDs are great for those that are risk-averse, but at the same time they aren’t going to make you millions overnight.
4. Index Funds
If you’re looking to diversify your investments, index funds may be a great option. Index funds are based on how the stock market is doing. The fund is either a mutual fund or an exchange-traded fund, and both are created by an outside fund manager. They give you access to a wide array of stocks at a lower-cost than investing in them individually. This makes them a popular option for both investing newbies and pros.
If you are just beginning to invest, the S&P 500 index fund is worth considering. This fund is the top 500 performing stocks traded today. It’s a good indicator of how the market is doing overall, which is why you may be familiar with this type of fund. There are numerous other index funds that you can research on your own. Speaking with a financial adviser may be helpful when looking at the different types of funds and your overall plan.
Takeaways
Investing is not a walk in the park. Everyone you speak with will likely have a different opinion on an investment strategy. This is especially the case in today’s economic situation. Remember, advisers can predict what may happen, but they cannot guarantee it. Before you go all in on one investment, think about your future. Be honest with yourself and know what you are getting yourself into.
No matter what you decide to invest in, it’s typically a good idea to start slowly. You’ve worked hard for your money, so you want to treat it with care. Once you get more comfortable with investing, you can try additional strategies. Lean on financial experts for assistance, but keep your goals in mind. And remember the ultimate decision is yours.