On the Atlas Credit blog, we usually like to focus on saving money and making sure you're financially sound at all times. However, one aspect of finances we rarely talk about is investing.
Sure, saving money is great, and earning interest on your savings after a long period can be a surefire way to grow that savings -- but investing may be your ticket to far more money in the long run.
At first you may think: I can't invest in the stock market. I don't know anything about it! And isn't it really just a gamble?
While it's true the stock market can be a bit complicated to understand and has undeniable risks involved, finding success through investing can be incredibly rewarding. Let's look into the why and how of investing your savings in today's Atlas Credit blog!
Why Invest?
Even if you're starting out with a small amount of money from what you've saved over your months or years of budgeting, investing (especially when you're young) is a very dependable way to see solid returns on your money. And if you're planning for retirement, you can never be certain if Social Security will stick around or be dependable enough to provide you enough income for an easy retirement.
Whether you have short-term or long-term goals, investments are among the best strategies for earning more money than your other options. The interest gained on savings account at your bank, while consistent, will offer only a small fraction of the full potential of investments.
Investing When You Are Young vs. Old
You can begin investing at any time. But keep in mind that investing in your 40s looks different than the more aggressive investing strategies you may try out in your 20s or even investment strategies for a 30-year-old.
The younger you are, the more aggressive you can afford to be with your money because retirement is further off. You have more time to make up for any losses. You should concentrate on exploring investment strategies by age. The younger you are, the more risk you can take. As you age into your 40s and 50s, you should become more conservative because you want to preserve your money for fast-approaching retirement. You also have less time to recoup your investment losses when you are older.
You can talk to an investment manager or financial advisor to determine the right risk for your age group. Ask them to use a risk calculator to determine the optimal mix for your money. Of course, some people may not feel comfortable with an aggressive investment strategy no matter what their age, and that is OK. Your decisions should reflect your desires, not those of your financial advisor.
Keep in mind that compound interest is your friend in your 20s. You will have more time for it to grow. Look for investments that reward that compound interest. You may want to forego options that grow more slowly, such as bonds.
Mutual Funds
Mutual funds are one of the simplest, guaranteed ways of growing your investments. They may not pay back in staggering amounts, but they basically promise to make you money.
A mutual fund distributes your investment across a wide range of stocks, meaning if one crashes, you stand to lose very little thanks to the strength of the others. Plus, mutual funds can be purchased through local banks for under $1000 initial deposit. Then, you get to sit back and watch your money grow over the years.
Diversification
On the same principle as mutual funds, diversifying your investments means you aren't putting all your eggs in one basket.
If someone tells you one day that you should put all your savings into buying stocks for one company because they're sure to increase dramatically in the coming months, you might take the risk. But don't do so without putting a significant amount of your investing dollars elsewhere. Sure, if the stocks of the first company skyrocket, you won't make as much. But if they fail miserably, at least you still have money elsewhere that's stable or growing to help mitigate your losses.
Other Options
Here are some other investment options to consider:
1. Stocks
When you purchase stocks, you're essentially buying a small portion of ownership of a company. Based on how well that company does financially, the stocks you own will fluctuate. You may have to watch these and the market at large more carefully to ensure you get a solid return.
2. Bonds
Bonds are loans you provide to companies and governments, which they pay you back over time with interest. Because you know for sure you'll get your money back (and when), they can be far more trustworthy.
Starting Out Investing
Now you understand how and why to start investing at any age. If you want to start investing immediately, take a look at your savings. Figure out what surplus you have beyond an emergency fund, and consider investing that money as soon as possible.
Or, take out a loan from a reliable lender like Atlas Credit. Sure, you'll pay the loan off over a 5 to 12 month period, but the money you invested will stay in the market and grow over time. It's an unusual but surprisingly simple way of making money that most people never think to try!
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If you're interested in learning more about budgeting, savings, and staying financially healthy, keep up to date with the Atlas Credit blog! In the future, we'll go into even more depth about investing your money — so stay tuned!
