Investing is a very powerful tool that can be used to build generational wealth! Don't know where to start? Start here!
Guide to Investing
Investing is something that has always interested me but fear has always held me back. This fear stemmed from not feeling educated or knowledgeable enough on investing. This is something that a lot of us face, especially those who were never taught about personal finance. It is very important to know how to invest, investing is the best tool for wealthy building
The Basics
So where do we start? Investing can seem so complex but when you come down to the basics, it can be very simple. The 2 basic things we can invest in are stocks & bonds. I like to think of stocks as tiny slivers of companies. When you buy a stock, you own a tiny share of a company, becoming a part owner. Stocks tend to be more lucrative but they can also be more risky. Bonds can be described as a loan you make to a company or government. The borrower uses this loan to fund their operations and as the lender, you get paid the interest they pay. Bonds are less lucrative when compared to stocks but they are more stable and consistent over time.
Where Do I Start?
Now that you know the basics, it is important to identify your money goals. Set up a spending plan and make sure that before anything, your needs are met. Then, decide how much you are comfortable spending and your risk tolerance when it comes to investing. It is also important to identify your financial goals. Are you thinking about long term goals like retirement or a house down payment? Or something more short term like next year's vacation or a christmas gift fund? It is very important to identify your goals so that you know what type of account you want to open.
Once your goals are identified, you will be able to explore the accounts available to you. An option is a standard brokerage account, which allows you to access investments such as; stocks, bonds, mutual funds and much more. If your financial goals are a bit more long term, such as retirement, a retirement account could be right for you. IRAs and 401(k)s are both examples of possible retirement accounts. If you happen to be a parent, your financial goals might relate more towards wanting to save up for your child’s education, which will lead you to education accounts such as 529 plans. 529 plans are a savings and investment account which allows money to grow tax free, the funds can be withdrawn for education qualified expenses.
The Bottom Line
Investing is something that can be very intimidating. However, it is not something that should be feared but rather used as a tool. As complex as it may seem, investing can be simplified, the best and first step is to gain a clear understanding of the basics. If you find yourself needing any type of guidance, feel free to schedule a coaching session with any of our Bobcat Financial Coaches!
Author:
Melissa Rodriguez
Bobcat Financial Coach
Melissa is a Bobcat Financial Coach alumna at the University of California, Merced. Read more about her here!
