Investing In Your Future: Investment Basics you Need to Know

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Whether you are working to be financially independent or saving for retirement, one of the essential tools you can have is investment. For many people, though, investing can seem like a daunting task. It can feel like you’re learning a whole new language. 

We believe that understanding the basics of investing is not only much easier than you may think, but it is also vital to creating the life of your dreams. 

Basics About Stocks

Stocks are the first thing a person thinks about when it comes to investing. After, the stock market is the center of any country’s financial system. Owning stock means you have shares of ownership in a specific company. As a shareholder, you receive a regular return of company profits through dividends. You can also acquire capital gains if the shares appreciate above what you paid for them.

You can invest in many ways, whether through brokerage accounts, 401(k) plans, direct stock plans, or mutual funds, which we will explore more later. Remember, if you decide to seek help with your investment, brokers usually charge a service fee of commission for buying or selling your stock. 

Basics About Bonds

When you think of a bond, you may think of the government savings bonds that a grandparent may have given their grandchild years ago. While investments mean you own a company’s share, bonds are when you lend money to a company or institution with the expectation of receiving that money back. Bonds can come from various institutions, from the Treasury to big corporations to nonprofits, and in different qualities. AAA ratings are the highest quality. 

They have to be held for a specific time to mature. However, the borrower will pay you regular interest. You can also sell the bonds on a secondary market through a broker if you need to. 

What About Investing in Mutual Funds

Mutual funds are probably the most popular way of investing. These funds are a collection of different stocks and bonds with a specific sector of the market in mind. Because of their convenience, mutual funds often seem like the perfect option for first-time investors or invest your 401(k).

The convenience comes with having a professional money manager focused on your funds. Their focus is to ensure that you get the best return possible. However, it does mean that there may be more expenses for maintaining your mutual fund. 

What About Real Estate

When it comes to real estate investing, a person’s first thought might be to buy an investment property. They can then rent out or “flip.” However, there are more real estate investment opportunities than you think. One of these options is investing in a real estate investment trust or REIT. 

REITs are similar to mutual funds. You invest your money in a trust that then invests in multiple income properties. A portfolio manager then manages the various investment properties in the portfolio.

These are just a few of the investment options that can be available to you. You can also invest in small businesses and start-ups. If you want to move beyond beginner-level investing, you can also look into hedge funds or private equity. No matter how you invest, it is best to speak with your financial advisor to understand the best option for you. 

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Michael Moffa

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