Investing 101

What Is Investing?

The quick answer to that question is growing your money by taking calculated risks to produce additional income. Instead of letting your hard-earned cash gather dust in a savings account, investing gives it a chance to bulk up by diving into different things like stocks, properties, or businesses. Whether you want to build a financial cushion, stash away funds for something big, or retire comfortably, read on to learn more about investing.

Explore Investment Options

There are many ways to put your money to work. Here are some of the most common options:

Stocks: Think of stocks as owning a tiny piece of a company. Stocks can offer high returns, but they can also be unpredictable.

Bonds: When you buy a bond, you lend your money to a business or government in exchange for regular interest payments. Bonds tend to be lower risk but lower reward.

Mutual Funds: These are collections of stocks, bonds, or other assets managed by professionals. They offer diversification (variety), which may reduce risk.

Real Estate: Whether buying and selling on your own or part of a group/trust, this investment may provide income and appreciation.

Commodities: These include gold, oil, and agricultural products, and may be good hedges against inflation. Remember the movie Trading Places?

ETFs (Exchange-Traded Funds): These are mutual funds traded like stocks. They combine the benefits of diversification with the flexibility of trading.

Business Interests: This includes owning a business, or acquiring a franchise, each offering potential high returns but requiring varying levels of involvement and risk management.

Alternatives: Things like investing in private equity, artwork, digital assets, cryptocurrencies, and hedge funds, offering unique opportunities for high returns but with greater volatility and risk than traditional investments.

DIY Investing: Are You the Next Wolf of Wall Street?

You may have a friend who brags about buying Apple stock at $10 per share. That sounds amazing, but did your friend tell you about Apple and other top tech stocks (the Magnificent Seven) recently losing $800 billion of shareholder value in a single day? Individual investors may not always highlight their losses, often due to taking on too much risk, having lousy timing, or listening to that “guaranteed” stock pick. Many people handle their own investments, but doing it right takes time, knowledge, and discipline. You’ll need to make that commitment, or hire someone to manage your investments for you, like a financial planner at Vera Planning.

Set Realistic Expectations

Remember that each type of investment comes with its unique set of risks, including the possibility of losing money. It’s important to figure out what level of risk you’re comfortable with now and into the future. If you’re young and thinking ahead to your retirement, you may be okay with riding the stock market roller coaster. If you’re closer to retirement age, safer investments may help you sleep better at night. Managing risk is our priority. That includes creating a diverse portfolio and then making ongoing adjustments to ensure that your investments align with your risk appetite and financial goals.

Choose the Right Financial Advisor

If you decide to get help managing your investments, here are a few factors to consider that will help you make the best choice.

Investment Models: Look for advisors who follow a consistent approach to designing, deploying, and managing your portfolio. You can’t do “custom” for hundreds of clients.

Experience: Advisors with diverse backgrounds can offer broader financial guidance compared to those focused on specific areas, like insurance or stocks.

Fees: You want their incentives aligned with yours, such as making money based on your portfolio growth vs. individual stock transactions.

Fiduciary Duty: Fiduciaries are legally obligated to act in your best interest. Our detailed article on fiduciary standards explains more.

Your Journey Begins Here!

Whether you’re managing your investment portfolio or you’d rather have an expert guiding you, what matters is making choices that resonate with your financial objectives and how much risk you’re comfortable with. Looking for advice that’s tailored just for you? Feel free to contact our team to schedule a no-obligation introductory meeting, and let’s start creating the blueprint for your financial future.

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