Let your money work for you. Instead of setting all your money aside, investing it wisely can produce profitable earnings - all while you do nothing!
Before exploring traditional ways of investing, we must establish the foundation of “risk versus reward.”
RISK VS. REWARD
You might have heard the phrase, “The higher risk; the higher the reward.” Take this with a grain of salt. While this is a good rule of thumb when it comes to investing, it is not always accurate. For example, investing in a start-up tech firm is extremely risky, but also extremely volatile with no affirmative hindsight of reward. It could potentially end up as a very good investment or a horrible one.
When deciding risk vs. reward, consider historical behavior of the investment type, as well as the current market condition. In addition, determine the amount of time you are going to invest. In many cases, the longer invested, the higher the reward. Lastly, think of your age. Younger folks in their twenties tend to have a higher tolerance for risk, with older adults becoming less tolerant as they approach the age of retirement.
TYPES OF INVESTMENTS
There are several different types of investments:
- High-Yield Savings Accounts allow you to place your money in a secure account, reaping interest over time.
- Certificate of Deposits (CDs) typically offer higher interest returns than a savings account, but limits access to funds for a period of time. Funds may be withdrawn at a possible penalty.
- Individual Retirement Account is specifically designed for retirement savings and reap interest over time.
- 401(k) Retirement Account is a retirement investment account with tax deductible benefits. Please consult a tax adviser.
You may also consider diversifying your portfolio by investing in stocks, bonds or even an appreciating asset such as real estate. When considering the asset to invest in, take the time to research key elements such as the potential return on investment, the payback period, volatility and risk. Also, consider consulting a financial adviser for their expert advice and opinion.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.