Investing in stocks and bonds can help grow your assets in the long-run, allowing your money to work for you rather than the other way around. Investments are typically the best option if you are saving for retirement or for your childrens’ education. Here are some basics to get you started!

The Basics

When you buy a stock or share, you purchase a piece of a publicly traded company. The company sells shares in accordance with the price of their business, with the intention of raising money. As an investor, you buy shares or stocks in a company with the hope that the worth of the shares will grow over time. You sell your shares when you would like to liquidate your assets. Bonds, types of debt that get paid back to your over time, are another option. Stocks are riskier investments than bonds; buying them both in balance will lead you toward limited risk and higher yields.

Your Options

The best investment portfolio capitalizes on diversity and includes stocks and bonds of varying maturities, and from companies of different sizes, sectors, and geographic locations. Investopedia explains the importance of diversity as follows, “Diversification involves the mixing of investments within a portfolio and is used to manage risk. For example, by choosing to buy stocks in the retail sector and offsetting them with stocks in the industrial sector, you can reduce the impact of the performance of any one security on your entire portfolio.” Investors suggest utilizing a mutual fund because you get a diverse array of investments packaged at an affordable cost. Mutual funds are also easier to liquidate if and when you need the cash. EFTs are another option; they are bundled like mutual funds, but investors trade them as stocks in the stock market.

Strategy

Your investment strategy will differ based on your capacity for risk and your timeline. For example, if you are investing in a 401k for your retirement in your 20s, you would benefit from embracing higher-risk options with greater chances for price fluctuations. Any drastic fluctuations in the market will even out over in time. But if you are in your 40s and saving for retirement, you would be better off with a more conservative portfolio, grounded in lower-risk bonds. Any investment broker or company can give you an array of options based on your risk level and timeline, allowing you to choose the portfolio that is right for you.

If you understand how the stock market works, investing in stocks and bonds can be an empowering part of your financial future! It gives you the option to plan ahead for your retirement, without having to work for every penny.

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