The basics of investing
It is often said that the best time to start saving or investing is now. For clarity, saving is the act of simply putting money away without it necessarily yielding any interest, while investing is putting money into various interest-yielding opportunities, with the hope that it will ultimately grow over time. There are various ways of investing, such as real estate, index funds, shares, and some may opt to invest in Euros and other currencies.
As with most investment opportunities, there is always a certain level of risk and uncertainty. This is also true when it comes to investing in currencies, however, investing in a relatively stable currency is advised by experts. Two of those so-called safe-haven currencies are the European Euro (EUR) and the US Dollar (USD).
Investing for your retirement
The unfortunate truth is that information and teachings on investing for your retirement are not necessarily prioritised at institutions of learning, unless one is taking a course that is specifically focused on that area of expertise. There are various options to consider, some of which are dependent on the line of work you are in. For example, if you work for a for-profit organisation, your employer is likely to offer the 401(k) savings plan, which is not always the case with smaller employers. Non-profit and government employees generally have the 401(k), 403(b) and 457 plans available to them. Self-employed individuals and those whose employers don’t offer any retirement plans can consider an I.RA., Roth I.R.A., S.EP. or Solo 401(k) plan.
Below are some other investment options worth considering for retirement:
- Index funds track a particular benchmark index but can’t be sold during the day. Moreover, the prices can only be obtained at the end of the trading day.
- Retirement plans, as noted above, differ based on employment conditions. These are often advised as in some cases a set amount is deducted from one’s salary and automatically invested over time. This reduces the chances of one being inconsistent in one’s saving and investment efforts.
- Stocks generally rise over a period of time, which is why they make for a great long-term investment. However, they are vulnerable to company performance and external market conditions. On the other hand, they can fall just as greatly as they can rise, which was reportedly the case in 2020. According to reports, stock prices dropped by more than 35% in the last year. Despite this, stocks are generally an attractive investment opportunity in normal conditions and circumstances.
- Bonds are a form of long-term investing, whereby an investor lends money to an entity or government. The investor then accrues interest annually, which is received along with the annual repayment. According to reports, bonds have proven more appealing because they are relatively stable and not as affected by external conditions, ensuring that they receive a consistent amount routinely each year.
- Real estate is an investment option that requires some level of knowledge on the property market or employing or partnering up with someone who does. The key here is to purchase property at the right price and sell at a reasonable price, based on factors such as location and amenities, amongst others.
Target date funds are said to be one of the most popular 401(k) investment types. Simply put, the investor selects a targeted date for enjoying their returns, and between the start date of the investment to the point that it matures, the stock and bond mix will automatically adjust to become more conservative and reduce the chances of losses over the years.