| Where
should you begin?
A decision to begin investing should include two key factors:
money that is completely free from any obligations and determined
goals. Decide if your investment is a short or medium term
goal, such as saving for an electronic gadget or new furniture,
or if it is a long term goal, such as retirement. Another
factor to consider before you begin investing is whether you
wish to have immediate access to the money you are investing.
After you have outlined your goals for investing, you are
ready to open an account and get started.
What type of investment account is
best for you?
There are many types of investment accounts available. Do
your research and choose the one you feel most comfortable
with.
Certificates of Deposit (CD’s)
– Bank accounts that offer a guaranteed rate of interest
for a specific time period. A penalty is assessed for early
withdrawal.
Discount Brokerage –
A brokerage house that purchases or sells securities on your
behalf for a low rate of commission.
Full Service Brokerage –
A brokerage house that purchases or sells securities on your
behalf and offers a variety of services such as planning assistance
and investment advice.
401(k) or 403(b) Plans -
Retirement savings plans that are funded by both employee
and employer contributions.
Individual Retirement Accounts
(IRA’s) - An individual plan that allows you
to make yearly contributions that grow tax-deferred. There
are several different types of IRA’s available.
529 Plan - A savings plan
that gives tax advantages to encourage saving for future higher
education expenses.
Money Market Account –
An account that allows individual investors to participate
in managed investments with easy access to their funds for
withdrawals.
Stocks - Ownership shares
in a corporation that entitle the holder to share in a portion
of the profit the company may make, as well as a portion of
the losses.
Mutual Funds - A company
that makes investments on behalf of investors with similar
goals. As a shareholder, you participate in the fund’s
gains, losses, income and expenses in an amount proportionate
to your investment.
Bond Funds – Can be
issued by a corporation, a municipality or a government agency,
and are long-term promissory notes to repay the principal
on a specified maturity date, along with periodic interest
payments over the life of the bond.
Annuities - An insurance
contract into which you make either a lump-sum contribution
or periodic contributions to an insurance company.
Real Estate – Purchasing
land and any dwellings on that land with the plan that the
value of the property will increase.
Your Next Step In Investing
Once you choose the account that best suits you, devise an
investment strategy:
- Make sure an emergency fund is in place so you can avoid
accessing your long term investments, such as stocks. This
can cause you to veer off track with your goals for investing
and can have serious tax consequences.
- The sooner you begin to invest, the more opportunity
your money has to grow. Stick with it – your investment
can compound over time.
- Invest in different types of accounts. This ensures all
of your eggs aren’t in one basket.
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