Investing may feel like navigating uncharted territory. Especially, if it is new to you. You may have questions like:
- How can I profit?
- What’s the risk?
- Is it worth it?
- Should I be investing now?
- What IS investing?
This is 100% normal and common when first getting into it. I am going to walk you through different types of investments tools you can use to weigh out your best options and give some background information that is important to take into consideration.
When I used to think of investing, I would’ve correlated it with something along the lines of cryptocurrency. All I knew was that the stocks were going through the roof. Now, I could tell you there is so much more than only stocks, and especially more than only crypto.
Investing is essentially reallocating your assets to earn growth overtime. This could be purchasing a bond, certificate of deposit, a share of stocks, etc.
Types of Investments:
Stocks: Money invested into a company, along with the company’s profit, in exchange for a return on their investment. When you purchase a stock you take part ownership of the company, that means when the company does well, your return goes up. If the company performs poorly, then your return will drop.
Bonds: A loan given from you to the government/companies. Ultimately you are loaning your own money to others, and they are paying it back to you with an interest rate. The return rate on these is typically around 5%. They last different lengths of time as well, some may be 10 years, some may be 30 years.
Mutual Funds: The bottom line is that a fund is money pooled together from multiple investors and is then invested into a variety of assets. They hold a variety of many different stocks and bonds which makes your portfolio diverse.
Certificate of Deposit (CD’s): Ultimately, you buy a “CD” from financial institution for a certain amount of time. You can buy one for three months, 6 months, a year, or longer and they all range with different interest rates. After the time is up, you get your initial deposit back PLUS the interest on the amount you originally bought the CD for.
When it comes to the big question of, “Should I be investing?” It breaks down to what you are comfortable with and what resources you have available. If you are paying for lots of things out of pocket it may be better to have your money where it is easily accessible, so you don’t end up with a loss or in need of loans to cover what you can’t pull out from your investments. However, you can learn lots of valuable lessons from investing. You could use this time to your advantage by starting with small amounts so you can get a feel for what type of investor you are. With this comes learning the apps, understanding how to look into the market, and more useful tips that might be helpful when you start investing on a larger scale after graduation.
If you aren’t prepared to wait for growth, there are other options that might fit you better. For example, a high yield saving account hooks up to your bank account and allows you to transfer money back and forth as needed (there may be a few days to process). Currently, apps like Betterment, Capital One, and EverBank have interest rates ranging from 4%-5% that compound daily. These are great options if you want a low-risk route but still want to be guaranteed a return.
Investments are a great tool to maximize your financial return. When deciding what you want to do it is important to take into consideration how much discretionary income you have, if you need the money currently, and just look into what exactly you plan on investing in! There is no right or wrong answer- just what works best with your current situation!
Leah Meek
Peer Counselor I
Powercat Financial
