The main idea behind investing is that your money is put to work for you in such a way that it is likely grow into more money. Your money grows when you are paid interest on money you have invested due to the value of the security increasing over a period of time. Common places money is invested include savings accounts, money market accounts, stocks, bonds, mutual funds and numerous other investment options, including real estate and private equity in non-public companies.
Investing expands beyond securities. You can invest in yourself or some other resource in order to achieve a specific return. For example, you can invest in yourself by returning to school to obtain an advanced degree or some other technical training in order to earn more money in the future. Or you can invest in a new laptop to better manage your information, which will in turn allow you to make more money in the future. Investing can also include your time. While your time can not always be quantified in terms of dollars, it should always be taken into consideration.
The content contained in this portal is not intended to constitute legal, tax, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.
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By now you are familiar with the concept of saving and how vital it is to achieving each of the goals highlighted within your financial plan. Now it is time to put your savings to good use by allowing it to work for you. Assuming you have already funded your emergency fund (three-six months worth of expenses) and that you have money leftover at the end of the month after you have paid your bills and living expenses. The leftover money you can use to invest.
Now that you are ready to begin investing to reach your long-term goals, such as funding a big-ticket purchase or even retirement, this section will help you get started.
Finding the Right Investment
Depending on your specific investment goals your investment choice may vary. Before selecting any investment option you should first answer the following questions:
- How much money do you need to save?
- How much time do you have before you need to use the money you saved?
- How much money can you contribute right now?
- Can you contribute more or less in the future?
- Will you be using your primary savings to fund this investment?
Stocks, Bonds, Mutual Funds and Commodities generally earn more interest in the long run. Therefore, these are considered long-term investments. It is usually not wise to select these options if you have a short period of time to invest. For shorter periods you should consider a traditional short-term investment, such as Money-Market Funds, Certificate of Deposits (CD's) and Treasury Bills (T-Bills).
Whatever investment vehicle you choose, it's important that you find a balance between risks and return that you are comfortable with. If you are not comfortable with any investment it is a good idea not to move forward. This will save you from worrying later on.