Investing money over time can change your life, but it still remains a bit mysterious to many working adults. Let’s lose some of the mystery.
So, what is investing? To understand that, let’s first talk about what it isn’t.
Cash on hand and money to achieve short term financial goals are not investments. These funds should be held in bank accounts. Now, if you are setting aside money for the long run, it’s likely you can afford to take some risk in exchange for a chance at higher returns. Taking the money and placing it in something like stocks, bonds, businesses, and precious metals, where it can potentially grow, is making an investment.
Investing money is becoming easier than ever thanks to “spare change” investment apps. Apps like Stash, Acorns, and Clink will allow you to start investing with just a few dollars (or less). However, if you can afford to invest more than $5000 a year, these apps are probably not your best option. However, if you are a beginner and want a simple way to invest your money, they could help you get started.
Now, let’s talk about what investing can actually do for your life.
- Grow Your Money Investing your money can allow you to grow it. Most investment vehicles, such as stocks, certificates of deposit, or bonds, offer returns on your money over the long term. This allows your money to build.
- Save for Retirement Put your retirement savings into a portfolio of investments, such as stocks, bonds, mutual funds, real estate, businesses, or precious metals. Then, at retirement age, you can live off funds earned from these investments.
- Start a Business Investing isn’t just about growing one’s own wealth, it can help others achieve goals. Many investors like to support entrepreneurs and contribute to the creation of new jobs and new products. You may be able to find an investor to help your business idea get off the ground or you could take a chance on someone else’s idea!
- Reduce Taxable Income You may be able to reduce your taxable income by investing pre-tax dollars into a retirement fund, like a 401(k). If you generate a loss from an investment, you may be able to apply that loss against any gains from other investments, which lowers the amount of your taxable income.
These are just a few of the reasons that investing your money is worth your time. Contact our team at Broussard Poché, LLP to learn about which options are right for you.