Investing is a hot topic these days. With stocks going higher and higher, and analysts saying that they don’t see much of an end in sight, more and more people want to jump head first into the market. However, before you get started, it’s important to think about the type of investor you are. No, I’m not talking Bullish or Bearish, I’m talking more about your lifestyle, the time you have, and the risk you’re willing to take.
Understanding Your Two Base Options
Although there are tons of different types of investments, you really only have 2 base options. Either you’re going to invest your own money, or you’re going to have someone else invest it for you. So, let’s look at those two options first.
Investing Your Own Money
Although this is far more time consuming than allowing someone else to invest for you, the cost of investing generally goes down substantially. Which leaves you to enjoy more of your gains! If you really know what you’re doing, this could be the best option for you. That’s because if you have someone else do the investing for you, you generally don’t have the don’t have as many options for diversification. You’ll have to choose from one of the options that the company you work with has.
Having Someone Invest For You
My favourite example of this is the Betterment platform. With Betterment, all you do is sign up for an account. Decide how much to invest initially and if you’d like automatic deposits made to your investment account from checking. Then, you decide how much risk you’d like to take by allocating what ever percentages you’d like to stocks or bonds. From there, Betterment does the rest.
There are some obvious advantages to this option. First off, you don’t have to take the time to research each and every stock or bond you purchase, which is a big plus. Beyond that, these companies invest for thousands of people. So, they’ve got experts calling all the shots. Meaning that you will generally come out ahead. However, as I said above, if you go this route, you will most likely be limited to specific types of investments.
Now Lets Talk About Risk
Before you get into any type of investment, it’s important that you understand the concept of risk vs. reward. For any reward, you’re going to take a risk. Generally speaking, the higher the risk you’re willing to take, the higher the potential reward. So, you have to think about what your goals are as far as growth, then compare those goals to the risk you’d have to take to achieve them.
That’s where a financial advisor really comes in handy if you’re not sure where to start and don’t want to start with a bundled Betterment type investment. Your financial advisor can explain the risks associated with investments that you would make in your unique circumstances. They will explain the difference between stocks and bonds, and why stocks are the riskier option. The bottom line is, if you’re not sure what you’re doing, and don’t want to go with an option that invests your money for you, it’s best to talk to a financial advisor.
Getting started in the investing world can seem pretty intimidating. However, I can definitively say that once you’re in, you’ll be hooked. There are few things more fun than watching your investments grow!