Investment

What is Investing?

Investing is the act of putting money or resources into an asset or venture with the expectation of generating profit or returns over time. Investments grow over time with compounding interest. There are different types of investment accounts and types of investments.

The key to building wealth is to start investing as soon as you can and let time do it's job- let the compounding interest grow your wealth.

Fun Facts:

According to The Money Guy Show's Certified Financial Planners, Brian Preston and Bo Hanson,

  • In your teen years, every dollar you invest is worth $239 at 65 years old.
    You need to invest $35 a month to reach $1million at age 65.
  • In your 20’s, every dollar you invest is worth $88 at 65 years old.
    You need to invest $95 a month to reach $1million at age 65.
  • In your 30’s every dollar you invest is worth $23 at 65 years old.
    You need to invest $340 a month to reach $1million at age 65.
  • In your 40’s every dollar you invest is worth $7 at 65 years old.
    You need to invest $1052 a month to reach $1million at age 65.
  • In your 50's every dollar you invest is worth $3 at 65 years old.
    You need to invest $ 3,155 a month to reach $1million at age 65.
  • In your 60's every dollar you invest is worth $1.35 at 65 years old.
    You need to invest $14,333 a month to reach $1million at age 65.

It's never too late to start investing. And your investments will continue to grow after you retire too.

  • According to a Gallup Poll, the average age investors started saving is 29 years old. And only 26% of people start investing before the age of 25.
  • Around 33% of millionaires never earned more than $100,000 as a household in a single working year, according to Chris Hogan's study, and only 31% averaged $100,000 a year

What is a Tax-Advantaged Account?

  • Roth Accounts- the money you contribute and the earnings it generates can be withdrawn tax-free after you reach a certain age and meet certain requirements because the contributions have been taxed already.
  • Traditional Accounts- your contributions are deposited before being taxed and require you to pay taxes on the money you withdraw during retirement.

Types of Accounts

Account Tax Advantaged Require earned income offered by employers Open on Your own Annual contribution limit
Individual Retirement Account (IrA)

yes

yes

no yes $7,000 (2024)
401K

yes

yes

(private & for profit)

no $23,000 (2024)
403B

yes

yes

(tax exempt &non profit) no $23,000 (2024)
457

yes

yes

(tax exempt &non profit) no $23,000 (2024)
Taxable no no no yes no

Types of Investments

This list consists of investments that are backed by hard assets, which means the investment is supported by tangible, physical assets such as properties, real estate, commodities, or other tangible items of value.

Investment Type What It Is
Stocks
  • Certificates representing ownership in corporations (you own a little bit of the company)
  • Stocks pay dividends when company is profitable
  • Value can increase and decrease (this is where the risk comes from)
Bonds
  • Represents being a creditor to a company (you lend money to an organization, they promise to pay back with interest)
  • Manage risk by doing higher quality bonds, because they are issued by companies and businesses with strong credit ratings.
  • Have predetermined maturity/repayment date and interest rate
Mutual Fund
  • Pools of money from many investors to invest in various securities such as stocks, bonds, and other assets (like a value pack of investments)
  • They are generally considered safer investments because they offer diversification and are managed by professional portfolio manager (doesn’t mean risk free)

ETF

Exchange Traded Fund

  • Can buy and sell throughout the day like a stock
  • Pooled investment opportunities that typically include baskets of mainly stocks, bonds, and other assets grouped based on specific fund objectives (like a mutual fund)
Annuity
  • Offered by insurance companies and very complicated
  • Turns a sum of money into a stream of payments
  • Often used in conjunction with retirement savings account

Find a Fiduciary Certified Financial Advisor

If you know you want to start investing, and you'd like to get the advice from a financial expert, these websites might help you find that expert.

The Garrett Planning Networkhttps://www.garrettplanningnetwork.com/
Tangerinehttps://hellonectarine.com/
National Association of Personal Finance Advisorshttps://www.napfa.org/

A Glossary of Stock Market and Financial Investing Terms

There is a lot of lingo that's used when talking about investing. Check out this glossarythat has easy to understand definitions as you are navigating your investing journey.

Have questions? Want more individualized support and resources about investments ? Click here to meet with a mentor!

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Another place with helpful investing information: Investopedia.com