What do you do with your money?  Do we always spend it wisely?  I know I can be honest and say, not always.  Have you ever thought about investing your money?  Most rich people only think about investing, we'll even some of them don't spend money wisely.   Well, fret not, in this issue, we will talk about investing, what it is, how to do it, and why it is important.
 

Let's start with saving, we should start saving money as soon as possible.  I know that it is hard to save money in today's economy, but you should always pay yourself first.  Even if it is saving $5.00-$20.00 per pay check.  Saving money grows interest and the sooner you begin, the more you will see your money grow.   When you become good at saving money, you can then think about making wise investments with some of your money.  Never, invest all of your money, because investments can be risky.  For example, if you invest all of your money into a business that closes, you will lose all of your money, with no possibility of recouping what you invested.  Keep in mind that an investment is an asset or item that you invest in with the hope that the investment will generate income and appreciate long-term. It is a way to save your money for the future. 

There are three main reasons to invest: inflation, achieve financial goals to build wealth, and plan for retirement.   People usually invest in stocks, mutual funds, or bonds.

One of the ways to figure out how long it will take to double your money when making a savings investment is by using the “Rule of 72.”  If you want to know how long it will take to double your money, take the number 72 and divide that number by the interest rate of your savings account.  For example, if you deposit $3,000 into a savings account with a 2% interest rate, 72 divided by 2 is 36.  So, in 36 years you will have $6,000.00. If you have an interest rate of 12%, you will make $6,000 in six years.  The higher the interest rate, the quicker your money will increase.

 

Another way to invest is in the stock market.  Stocks are said to be the leading way to make money and stay ahead of inflation over time; which is ideal if you have long-term investments goals.   When you invest in stocks that a company offers, you are buying a share of that company.  Depending on how well the company does determines how much each share is worth.    Stocks give a higher rate of return on your initial investment, but there is a risk.  The risk is that your stock is not FDIC insured like a savings account.  

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Bonds are also ways to invest as well.  A bond is an agreement on a loan between the issuer and the person buying the bond (bondholder).  The bondholder gets a certain amount of money and is given interest on the loan.  The term of a bond is given a fixed-rate at the time of issue and expires on a specified maturity date.  At the time, the issuer is responsible to pay the bondholder the face value of the bond.  Throughout the term of the loan, the issuer also pays interest to the bondholder.  The interest amount is set when the bond is issued.  You can choose to sell your bond before the term is up, but if you do, you will lose money.  It’s always best to keep bonds for their full term. 

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Mutual Funds are also ways to invest.  When investors decide to invest in a mutual fund, the money is put in a pool of money from other investors to create a large portfolio, so everyone benefits from bigger profits, when a profit is made.  Mutual funds are used to buy a variety of investments like stocks, bonds, or other securities.  Because, there is such a variety of different investments in one mutual fund, there is not as much of a risk involved.  Usually if one investment has a bad return, another will make up for that loss, if you are making the right investments.  To invest in a mutual fund, an investor buys shares of the fund and becomes a shareholder.  That fund makes money in two ways:  by earning dividends or interest on its investments and by selling investments that have grown in price.  The fund then pays out its profits to the shareholders.  

 

To make sure that you are making the right strategic investments, it is best to consult with a successful skilled investment banker.  A good place to start is to ask your bank for recommendations.

 

Watch the video below to find out from some of the best investors from the t.v. show Shark Tank, as they discuss their investor tips in their Vanity Fair interview:

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