It’s easy to understand the importance of saving money. Whether preparing for retirement, or for a big purchase, making consistent additions to your savings over a number of years can be an effective strategy to accumulate wealth and establish a secure future. Even small amounts can add up over time. However, to really grow your money, consider investing the most important tool available.
Making money is not just about earning from a job. It is about effective money management, saving, and then investing in the right financial assets to earn more profits. Simply put, you need to make money out of money through investments.
Financial planning is the act of managing your income, setting and prioritizing your financial goals, and then allocating your assets across investments, keeping in mind your limitations and requirements. It’s not a simple task and multiple factors about your life need to be considered in order to form an effective financial plan. Many individuals work with a financial planner to develop their plan, create a financial portfolio (collection of financial assets), and to address the occasional updates when financial changes occur.
- Stocks are securities that represent ownership in a corporation.
- A Mutual Fund is a professionally managed investment portfolio that pools money from many investors to purchase securities.
- Bonds are a form of loan, or IOU, where the holder of the bond is the lender, the issuer of the bond is the borrower, and the coupon is the interest.
- Certificates of Deposit, or CDs, are a secure form of time deposit where money must stay in the financial institution for a certain length of time to earn a promised return.
- Other popular ways to invest are through real estate, purchasing precious metals, and buying ownership in a small business.
Investing in a variety of financial instruments is called diversification. It’s a great way to manage risk by minimizing the impact that the performance of any one investment will have on the overall performance of the portfolio. In other
words, diversification aims to maximize return by investing in different areas that would each react differently to the same event. For example, a single mutual fund can invest in hundreds—sometimes thousands—of individual securities
at once. So, if any one security does poorly, the others are there to help offset that risk. Whatever you choose to invest in, the objective is the same: to make investments that generate additional cash.
Whether your goals is to afford a luxury vehicle or retire comfortably, investing can be essential in getting where you want to go in life. Contact our financial advisor, Scott Brady at 248.443.4234 to learn about ways you can invest in your future.
The investment and insurance products recommended, offered or sold by Capital Asset Advisory Services and its representatives are not Credit Union shares or deposits, are not federally-insured by the National Credit Union Share Insurance Fund, are not obligations or guaranteed by Capital Asset Advisory Services or the Credit Union, and involve investment risks, including possible loss of principal.