Once you decide to start investing money, no matter when or what company, it can be a somewhat scary, confusing, yet exciting experience. It is imperative that you do your homework first though, to ensure that you know where you money is going, exactly who is handling it and what you can expect in terms of return.
Listed below are a few things you need to know before you decide where to put your money. Of course, you will need to do additional research as well, but this should give a a good start in the right direction.
When you purchase stocks, you are investing in a company and their product(s). Some people like to invest in stocks for the long-term and others for the short-term. If you are looking at a long-term investment, you should look at corporate earnings for that company. Generally, your return falls in line with that of the company. In comparison, those who are looking for a short-term should be more concerned with interest rates. As interest rates rise, stock prices tend to fall because people will pull their money from the market. For the most part, long term investing in stocks will bring you a nice return, though, as the not so distant past has shown us, there are hiccups now and again that can make it a roller coaster ride.
Bonds are often considered the safest way of investing. Essentially, you are letting an institution borrow your money for a predetermined length of time with the promise of a set rate of return. The only downfall, if you want to call it that, is that the return rate is less than that of stocks. On the flip side though, the roller coaster ride isn’t usually as rough.
Investing in mutual funds has you handing your money over to a professional who invests in many companies and or bonds. This gives your portfolio diversity so that if a company or bond should stumble, you shouldn’t lose all of your money. These professionals are usually well-versed in the ways of the market, allotting you some sense of security, just remember that there is never “a sure thing” when it comes to investing.
All in all, investing is a great way to finance your retirement, and should be started at an early age. Spreading your wealth across stocks, bonds, and mutual funds will help your nest egg grow so that, hopefully, one day, you won’t have to worry about money anymore!