Investing has become increasingly important over the years, as the future of social security benefits becomes unknown.
People want to insure their futures, and they know that if they are depending on Social Security benefits, and in some cases retirement plans, that they may be in for a rude awakening when they no longer have the ability to earn a steady income. Investing is the answer to the unknowns of the future.
You may have been saving money in a low interest savings account over the years. Now, you want to see that money grow at a faster pace. Perhaps you’ve inherited money or realized some other type of windfall, and you need a way to make that money grow. Again, investing is the answer.
Investing is also a way of attaining the things that you want, such as a new home, a college education for your children, or expensive ‘toys.’ Of course, your financial goals will determine what type of investing you do.
If you want or need to make a lot of money fast, you would be more interested in higher risk investing, which will give you a larger return in a shorter amount of time. If you are saving for something in the far off future, such as retirement, you would want to make safer investments that grow over a longer period of time.
The overall purpose in investing is to create wealth and security, over a period of time. It is important to remember that you will not always be able to earn an income… you will eventually want to retire.
You also cannot count on the social security system to do what you expect it to do. As we have seen with Enron, you also cannot necessarily depend on your company’s retirement plan either. So, again, investing is the key to insuring your own financial future, but you must make smart investments!
Getting Your Feet Wet – Begin Investing
If you are anxious to get your investments started, you can get started right away without having a lot of knowledge about the stock market. Start by being a conservative investor with a low risk tolerance. This will give you a way to making your money grow while you learn more about investing.
Start with an interest bearing savings account. You may already have one. If you don’t, you should. A savings account can be opened at the same bank that you do your checking at – or at any other bank. A savings account should pay 2 – 4% on the money that you have in the account.
It’s not a lot of money – unless you have a million dollars in that account – but it is a start, and it is money making money.
Next, invest in money market funds. This can often be done through your bank. These funds have higher interest payouts than typical savings accounts, but they work much the same way. These are short term investments, so your money won’t be tied up for a long period of time – but again, it is money making money.
Certificates of Deposit are also sound investments with no risk. The interest rates on CD’s are typically higher than those of savings accounts or Money Market Funds.
You can select the duration of your investment, and interest is paid regularly until the CD reaches maturity. CD’s can be purchased at your bank, and your bank will insure them against loss. When the CD reaches maturity, you receive your original investment, plus the interest that the CD has earned.
If you are just starting out, one or all of these three types of investments is the best starting point. Again, this will allow your money to start making money for you while you learn more about investing in other places.
At the end of the day you have to make your own judgements and seek professional help before getting into investing in any stocks or shares.