The formula for building wealth is simple: earn + save + grow. Growth comes with investment, and there are endless opportunities for investment. With all of the options for investment, you may be wondering, “Is there investment help near me?” Luckily, the answer is yes. First, let’s break down common investment strategies.
Profits from Investments
Investments generally earn money in three different ways:
- Income generated from property or businesses
- Income from interest and dividends from stocks or dividend-paying stocks and bonds
- Increase in value from stock portfolio, real estate, or other assets that appreciate.
Investments largely work due to the principle of compound returns. Specifically, many who save and invest use compound interest to significantly increase their wealth. Basically, money saved in an interest earning account begins earning interest upon its interest (hence: compound interest).
The effect of compound interest is best observed over long periods of time, which is why investors suggest starting to save early. For example, a person who saves $2,000 a month for 8 years in an account earning 12% interest will transform into over $2 million dollars over 45 years. That’s with an investment of $16,000!
Take or Avoid Risks?
Investments do involve risks but, generally speaking, long-term investments involve much less risk. A low-risk investment option involves using an FDIC (guaranteed by the federal government) backed savings account with a return of 2%. Some options (which will restrict your withdrawal of the money) offer 3% APY provided you leave the money untouched for 4-5 years.
Another smart investment option to consider is low-cost mutual funds or exchange-traded funds. This option is ideal for a few reasons:
- Diversification: spreads out risk.
- Doesn’t require substantial assets.
The key to your investment strategy when you’re young is: making sure that you have a balanced portfolio and maintaining your investment strategy through the ups and downs of the market. Now, let’s shed some light on investment products.
Types of Investments
If you’re asking about “investment help near me,” then look no further than retirement accounts. They may be offered by your employer.
People afforded the opportunity by their company to invest in a 401(k) plan should do so. You can set aside money, pre-tax, into an account that earns interest. What’s more, your company often matches your contributions. You cannot withdraw your savings until age 59 ½ without incurring a penalty.
A traditional Individual Retirement Account allows you to save money long-term, and you may enjoy a tax deduction in the meantime. Now, this type of account allows you to purchase investments like mutual funds and stocks from a brokerage firm. You can contribute up to $6k per year, and you can do this in addition to your 401(k) plan. Once the money is distributed in retirement, it is taxed like income.
This type of IRA is similar to a traditional one, but instead of offering a deduction, you incur a tax benefit. Your contributions grow tax-free, and when you withdraw, the money will not be taxed as income.
When you purchase a bond, you’re essentially investing in the expected success (growth) of a company, project, or government. Government bonds are almost an assured thing, which is ideal for the risk-averse investor.
This investment involves pooling your money in with other investors. A financial professional manages this investment by choosing which securities to buy for the investors. Most advisors consider mutual funds a good way to begin investing, as they require less investment-savviness than individual stocks or bonds.
Mutual funds create a broad portfolio, which is less risky, and they’re usually a less expensive option. You can choose to use a brokerage firm, or you can find options online.
For Seasoned Investors
These investments are for those with a little more experience under their belt.
Your money can definitely grow in the stock market but learning the ropes can take a while. Read about the best practices when investing in individual stocks, specifically buy-and-hold.
Also, resist the temptation to devote too much of your portfolio into stocks immediately. Gain some experience while maintaining a diversified portfolio. There are great online platforms to start trading.
Buying property can be a fantastic way to build wealth. However, it does come with significant risks. Typically, those who invest in real estate do so for the cash flow it generates. Rental income can pay a majority of the expenses, and it will increase with inflation. The bonus here is that your mortgage will remain the same.
One thing to keep in mind is that being a landlord can be a tremendous headache. Some people aren’t cut out for it. If being a landlord isn’t your idea of fun, you can still invest in ETFs that are comprised with real estate securities.
An in-vogue investment, crowdfunding allows you to be a low-cost investor in lending, real estate, and other ventures. Check out this great article about crowdfunding investments.
Investment Help Near Me
We hope this article has shed some light on investment opportunities for millennials or others who are new to investing. If you have learned one thing, hopefully it’s that starting earlier is better. For individual, personalized investment help, contact the professionals at Argent Bridge Advisors today.