Investing made simple. Where should you invest? Information on stocks, mutual funds, index funds, retirement accounts and more. Also be sure to check out our complete guide to investing.
Setting realistic financial goals is what separates the successful from the unsuccessful. Goals are good for every area of life, but setting financial goals specifically is important. The process of setting goals is just as important as having them, so let’s look at what it takes to set realistic and effective financial goals.
Determine Your Goals
Just like with any goal, a realistic financial goal needs to be specific, attainable and written. It will only hurt you to set a goal for an amount or a time period that isn’t realistic. It is very important that you write a specific goal, including all of the numbers involved.
All goals should be written.
You’ve probably heard the popular statistic: only 3% of people write their goals down and that says something about the small amount of people that stick with goals and achieve them. Putting goals in writing holds you accountable to the goal.
An ETF (Exchange-Traded Fund) is a fairly new invention and they are getting very popular. An ETF is similar to an index fund. It tracks a particular index like an index fund, but it is traded like a stock.
This means that an ETF has a ticker symbol and you can buy it by the share. Exchange Traded Funds can also track commodities such as gold and silver. This is a great way to invest in commodities with small investment amounts without holding physical assets. They also give you more liquidity than holding physical commodities…
A bond is a form of investment. Simply put, a bond is debt.
When you buy a bond you are basically offering a loan to a company or government, and the entity that you borrow from is then in debt to you; unlike a stock where you own a share (or a piece) of a company, with a bond you are just loaning the money for a certain amount of time.
This article is for the investor wanting to know what a bond is (for investing purposes not macro economical purposes) so I won’t get too deep into monetizing, but I will say that bonds are often what people are referring to when they talk about the government printing more money out of thin air. This occurs through selling bonds to the public, as well as the government buying their own bonds (monetizing).
So what are the rates of return for bonds?
Once you have paid off your debt (with the exception of your mortgage), you are ready to start seriously investing.
The only exception for investing before you are debt free is retirement.
It’s never too early to start investing some amount into a retirement account, whether it be through your work’s plan or on your own plan.
Retirement should be an automatic amount that is deducted every month, no matter what.
This is the philosophy: Pay yourself first!
Even if you can only afford $10/month at first, you should be investing something into a retirement account…
A mutual fund is like a bucket full of multiple different stocks, bonds, securities or a combination that you invest in collectively. When you buy into a mutual fund, you are buying into all of the securities in the fund by making one single investment. It is a great way for instant diversification.
There are different types of mutual funds…
There are stock funds, sector funds, passively-managed, actively-managed, load, no-load, money market funds, balanced funds and that’s just naming a few of them.
This may seem confusing, but if this seems more complicated than you would prefer, there is a simple rule that you can live by…
An index fund is a fund that tracks an index, such as the S&P 500, the Nasdaq 100 or the Dow Jones (the 3 most popular American indexes). So what exactly is an index?
What is an Index?
An index is a representation of a portion of the stock market.
For example: The Dow Jones Index is comprised of 30 companies, these are 30 of the largest and most influential companies in America. So if you were to invest in a Dow Jones index fund, you would be able to invest in a single fund, but that single fund would be invested in all of the companies on the Dow Jones Index.
There are larger indexes, the largest among popular indexes probably being…
The stock market can be scary for new investors, but it’s not quite as complex as the folks on Wall Street want to pretend it is. This brings us to the most basic question about the stock market: What is a stock? A stock is a share of a public company.
What is a “public company”?
There a private companies and there are public companies. Private companies are owned by individuals or by other companies. Public companies are owned by, you guessed it, the public! This is a way to have multiple people contribute to a company financially.
Here is an example…
IRAs are great for retirement accounts, but that’s that all!
There are many little-known uses for an IRA to shelter money from taxes.
Normally when you pull money out before retirement, you are penalized with an additional 10% tax, but here are some ways to avoid that extra fee…