It's Never Too Late to Learn: Investing 101
Many people choose to plan for retirement through savings plans, believing it is a less risky way to accumulate wealth. But this mindset means you’re missing the point that saving is only part of the battle. By saving, you ensure that you can live your day-to-day life with a cushion for emergencies. Taking the next step - investing - may help your savings multiply.
Why Invest?
With the growing rates of inflation, your money is bound to lose value if you simply leave it sitting. Say you took $100 last year and put it in an envelope to hold onto for one year when the current inflation rate was 4% (as of June 2021, it’s actually 5.4%).
One year later, when you opened the envelope, that $100 would only hold the value of an envelope of $96. Don’t wait for your money to lose value! Investing can help your money to keep up with inflation, or even outgrow it.
Overcome Your Fears
Investing can seem intimidating! For a lot of people, it just doesn’t seem accessible. We see movies and read articles that depict the best and worst-case scenarios of “playing the market.” It can seem like those who invest large sums of money aren’t afraid of losing it all.
Here’s the reality: Many who have their money working for them through investments are safe. Working with a trustworthy team that can help you harness the power of time and compound interest means you may increase your chances of making a return.
Time is Your Friend
If you’re willing to let your investments ride the ups and downs of the market, you could be more likely to see that nest egg grow. With the right financial advisor and the gift of time, your investments can grow over time.
Four Types of Investments
Individual Stocks: This option takes some research and involves a certain level of risk. If you do your due diligence, the payoff can be great, but there is a bit more personal knowledge of the market involved.
Mutual Funds: Similar to bundling insurance, a mutual fund bundles investments that have a common thread and allow you to make one single transaction that immediately diversifies your investments without having to seek out individual opportunities.
Index Funds: These investments fall in the category of mutual funds but differ in average cost and the method of tracking market trends. Where mutual funds are actively managed and therefore factor in the cost of the labor involved, index funds depend on data accumulated by algorithms within the market. By cutting out some of the labor of tracking market trends, the cost is typically lower and more of your money can remain untouched.
Exchange-Traded Funds (ETFs): These investments are bundles made up of stocks, bonds, currencies, or cash. Unlike mutual funds, these investments trade like stocks, meaning you can purchase them for share prices that are often lower than the buy-in costs of other types of investments.
When you feel like you’re ready to dive deeper into the investing world, our team at Gretchen Rehm Financial can help. Investing is just one option in the process of developing your retirement plan! Let’s discuss all your options.
The views and opinions expressed herein are those of the author(s) noted and may or may not represent the views of Capital Analysts or Lincoln Investment. The material presented is provided for informational purposes only. Nothing contained herein should be construed as a recommendation to buy or sell any securities. As with all investments, past performance is no guarantee of future results. No person or system can predict the market. All investments are subject to risk, including the risk of principal loss. Diversification does not guarantee a profit or protect against a loss. Investors cannot invest directly in an index.
