Tag Archives: investing
Happy 2014! While everyone is busy looking backwards I’m looking forward and I’m looking forward to doing things differently. This year I have joined the Grow Your Dough Throwdown by Jeff Rose at Good Financial Cents.
What Jeff and a bunch of other personal finance bloggers are doing is investing $1,000 various ways. The goal is for each blogger to report back monthly on how their portfolio is doing and I guess whoever ends up with the most money at the end of the year gets serious bragging rights. While they’re mostly investing in the stock market, and honestly, who wouldn’t since the markets returned something like 30% last year, I’m going to be a little unorthodox.
Things like spending less and earning more are extremely important, which is why those of us who write about this stuff spend so much time focusing on the topics. We want you to create an excess every month that you can then invest for the benefit of your future self. Because I have that ability, I’ve gone to the future and asked your older self about this, and they agree with me. I am the lamest time traveler ever.
Once you’ve got some savings, it’s time to invest it. Unfortunately, most people don’t know the first thing about investing. The stock market is a big scary place, and sometimes stocks go down a lot. How are you supposed to know which stocks or mutual funds to pick? Sure, you could learn about it, but that takes time, and there’s a lot on TV.
So you do what most people do – you find a financial advisor and entrust them with investing your money. Okay, but how do you find a good one? I can’t guarantee you’ll find one that will lead you to crazy riches, but here are a few tips on how to pick a good one.
You want your money to make more money for you. The best way to make that happen is to save or invest the money that you earn. But how do you choose which one is best for you and your future goals? Why do you have to choose? According to Pete Briger, Board of Directors at Fortress, finding a balance between the two is the best way to keep yourself covered.
First, let’s look at what both options entail.
Putting Money into Savings
This is the easiest and certainly the least risky of your options. You simply set aside some money out of every paycheck and then leave it alone.
There are many people who seek the best CD rates when buying a 1 year CD. After all, it is only normal to want the best possible interest rate when buying any investment products. 1 year certificates of deposit are very popular financial instruments among those who want their savings to grow for a few reasons.
Certificates of deposit are guaranteed by the bank and the government not to lose any of their value, so there is no chance of you ending up with less money than you started with after the investment comes to maturity. The value of a CD grows at a constant rate, unlike market based investments such as stocks, whose value fluctuates on a daily basis.
All of my life I’ve heard about diversifying your assets by having stocks and bonds. I kind of know what a stock is but the other day I wondered, just what’s a bond, and why would I want one? If you have the same questions then stay tuned for the latest installment of my basic finance course: Finance 101.
I actually own some bonds as part of my investment strategy. My last employer offered employees the ability to purchase bonds automatically through a direct payroll deduction on a monthly basis. I figured, hey, why not and allocated $100 each month for about 6 months towards bonds. They were mailed directly to my mom, and I promptly forgot about them until I bumped into an old pay stub last week. I began to wonder, just what the heck did I purchase anyway? Let’s begin with definitions. According to About.com, a bond is “simply an ‘IOU’ in which an investor agrees to loan money to a company or government in exchange for a predetermined interest rate.” Great! So who’s the investor? Well, in this case that would be me or whoever purchased bonds. Sweet! I’m an investor. Now, how do I make money from this? This is where it gets interesting. It all depends on what types on bonds you’ve purchased.