Investing is the proactive use of your money to make money. It is different from saving, in that it is a passive activity, even though it uses the same principle of compounding. Saving is more focused on safety of principal(the amount you start out with) and less concerned on return.
Investing can run the spectrum from conservative to very aggressive in terms of risk. You would measure your results by the expected return weighted against the anticipated risks. Most savings instruments carry unseen risks, and trade security for return., meaning they pay very little. When you factor in infation and taxes, many so called safe savings instruments return almost nothing and can actually lose ground over time.
When you buy a stock, you are buying a piece of a company….you become part owner, and you then have certain rights including on voting on important matters before the company, and participating in profits of the company if they distribute dividends. No savings instruments give you ownership. A CD does not make you part owner of the bank just as a US Treasury Bond does not make you part owner of the government.
Owning a stock allows you to participate in the growth of the company. As the value increases, so does your investment, and you may receive bigger dividend checks which you may reinvest or take as the form of a check.
The key to managing your investments is to be diversified and understand your tolerance for Risk. You need to determine if you want to carry risk and how much. I have determined that my risk comfort is the “good night’s sleep” test. If you are worry about the amount of risk in your portfolio so much that you loose sleep.its time to reduce your exposure to riskier investments. There is no right or wrong amount of risk, but if you are 5 years away from retirement you don’t want to be taking extraordinary risks with your nest egg.
Change will rattle the market, and what this means is that there will be bumps along the way. It is unrealistic to expect a straight shot upward. Economic, political, social, inflation, interest rates, oil/energy prices, war/terrorism, crime/fraud and serious political unrest will all effect investments and that is what casuses uncertainty.
The buy and hold of the past, just doesn’t work anymore. The world is a different world and the way that we approach investing has to change with it. As a fee based advisor, I am putting your interests first. I’m working in your parameters of Risk|Reward and obtaining your goals and I’m there to help you in any way I can to understand the process.
Are you on the right path? Not sure? Come in and lets look at what you have and see what we can do to suit your needs.