Investment markets are more accessible to the average American than ever before, and thanks to retail websites and mobile applications alike, everyday people are attempting to build wealth through the transaction of securities. It’s important to remember, though, that the value of these stocks and bonds fluctuates with market conditions. You’re not guaranteed to make money from your investments, and they may actually lose value. In this blog, the advisors at Service Financial Group have provided an introduction to investing that we hope gives you a working knowledge of the practice, process, and potential benefits of getting involved with the markets.
Investing vs Saving
You probably know what basic savings consist of: simply putting aside part of your earnings over time. This money is subject to no risk when under the share insurance limits, but does not help you earn any profit or returns aside from the dividend rate on your savings account. On the other hand, an investment is based on the concept of earning returns or profit on the money you put in a fund or spend on an asset. The key here is that the element of risk is what makes them potentially profitable. There is a direct relation between returns and risk when it comes to investments: the more significant the risk involved, the higher chance of earning greater returns.
How can you invest?
The most important thing you can do before deciding to invest in analyzing your financial situation in terms of risk tolerance, investment objective, and other factors such as current and planned family size and life goals. This may be best accomplished by meeting with a financial professional. If you decide to embark on a journey to the markets, it’s important to remember that diversification is key. Building a wide-ranging portfolio by putting your funds in different instruments for maintaining the right balance between risk and returns. One other piece of advice? A reassessment of your investments periodically may be beneficial, as funds are influenced by market forces. That is, external events and trends could keep you from generating good returns, necessitating an adjustment.
What are the potential positive outcomes from investing?
To help money grow: One of the primary reasons people invest their money is to ensure that it grows sizably over time. Capital appreciation is generally a long-term goal that helps people secure their financial future. To make the money you earn grow into wealth, advisors can help you consider investment options that offer a significant return. Some instruments to achieve growth include real estate, mutual funds, commodities, and equity. The risk associated with these options can, at times, be high, but the return can also be significant.
To save for retirement: Saving for retirement is a must. It’s essential to have a fund to fall back on in your golden years, because you may not be able to continue working forever. By investing portions of the money you’ve earned during your working years, you can allow those funds to grow enough to sustain you after you’ve retired.
To meet other financial goals: Investing can also help you achieve short-term goals. Some investment options come with short lock-in periods and high liquidity. These are ideal if you wish to save up for shorter-term targets.
We hope this primer helps give you a useful look inside the world of investing, and things to consider before you start your journey. When organized and handled correctly, these practices may help lead you to your short and long-term financial goals. Don’t forget – it’s important to constantly re-assess your future plans, risk tolerance, and returns.