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How do you make your money work for you?
I want to make sure that when my money goes in the bank, I get good returns. I dont know much about the technical side of finance and investing
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7 answers
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Stephen’s Answer
Remember your money is your crown jewels. Don't give your crown jewels a way easily. If you put it in a bank, make sure you have a purpose associated with it, so you can decide what saving vehicle will help you meet your needs. If you are putting money in for a long period, a regular bank account does not provide the return that would be best to meet that need. Look at CD's, or larger interest baring accounts.
Invest in things that grow. Your crown jewels are your responsibility.
Invest in things that grow. Your crown jewels are your responsibility.
Updated
Charlie’s Answer
Getting started with investing may initially appear daunting, but rest assured, with some basic knowledge, you can embark on a rewarding investment journey. Begin by setting a clear financial goal and envisioning what you can achieve through investing—whether it's securing a comfortable retirement, realizing your dream of owning a home, or simply expanding your wealth.
Immerse yourself in learning about various investment options, asset classes, and strategies. Discover the fascinating world of risk and return, along with the empowering principles of diversification and risk tolerance. Abundant online resources, books, and courses await, ready to empower you with a solid foundation of investment knowledge.
Before you take the leap into investing, consider building a safety net by setting aside three to six months' worth of living expenses in an FDIC-insured savings account. This precautionary measure ensures you won't be forced to prematurely sell your investments in the face of unexpected expenses. Additionally, if you have high-interest debt like credit card debt or personal loans, prioritize clearing them first since the interest on these debts is typically higher than any potential investment returns.
Choose an investment account tailored to your needs. Explore the possibilities of individual brokerage accounts, retirement accounts, or a tax-advantaged health savings account. Delve into the intricacies of tax implications and contribution limits associated with each option, maximizing the benefits available to you.
For beginner investors, it's often recommended to start with low-cost, diversified investments such as index funds or exchange-traded funds (ETFs). These investment vehicles allow you to own a broad portfolio of stocks or bonds, spreading your risk across multiple companies or sectors. Craft an asset allocation plan (the mix of stocks, bonds, and other assets) that harmonizes with your risk tolerance and investment goals, establishing a sturdy framework for your financial aspirations.
Consistently contribute to your investment account and regularly assess your investments to ensure they align with your goals. Fine-tune your portfolio periodically, upholding your desired asset allocation. Remember, investing is a long-term endeavor that rewards those who exercise patience and discipline. While investments carry inherent risks and positive returns aren't guaranteed, your journey toward financial growth holds incredible potential.
Immerse yourself in learning about various investment options, asset classes, and strategies. Discover the fascinating world of risk and return, along with the empowering principles of diversification and risk tolerance. Abundant online resources, books, and courses await, ready to empower you with a solid foundation of investment knowledge.
Before you take the leap into investing, consider building a safety net by setting aside three to six months' worth of living expenses in an FDIC-insured savings account. This precautionary measure ensures you won't be forced to prematurely sell your investments in the face of unexpected expenses. Additionally, if you have high-interest debt like credit card debt or personal loans, prioritize clearing them first since the interest on these debts is typically higher than any potential investment returns.
Choose an investment account tailored to your needs. Explore the possibilities of individual brokerage accounts, retirement accounts, or a tax-advantaged health savings account. Delve into the intricacies of tax implications and contribution limits associated with each option, maximizing the benefits available to you.
For beginner investors, it's often recommended to start with low-cost, diversified investments such as index funds or exchange-traded funds (ETFs). These investment vehicles allow you to own a broad portfolio of stocks or bonds, spreading your risk across multiple companies or sectors. Craft an asset allocation plan (the mix of stocks, bonds, and other assets) that harmonizes with your risk tolerance and investment goals, establishing a sturdy framework for your financial aspirations.
Consistently contribute to your investment account and regularly assess your investments to ensure they align with your goals. Fine-tune your portfolio periodically, upholding your desired asset allocation. Remember, investing is a long-term endeavor that rewards those who exercise patience and discipline. While investments carry inherent risks and positive returns aren't guaranteed, your journey toward financial growth holds incredible potential.
Updated
Veneta’s Answer
A good place to start investing can be low-risk, FDIC-insured financial instruments such as high-rate savings accounts and high-interest CDs some of which are yielding over 3-4% now. Locking funds you may not need for the medium to long-term can get you a higher return.
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Jonathan’s Answer
I agree with Charlie and Peter above. Forget banks because your money will dwindle to nothing unless they pay you more in interest than the rate of inflation which will never happen. Open up an account at Schwab and ask questions via the chat feature online-you will find a wealth of information about a broad range of financial topics. As far as return on your money, they currently have a money market mutual fund paying 5.25% interest with complete liquidity and no minimum balance. No bank is going to offer that.
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Kevin’s Answer
Excellent query, Kevin!
There's a vast array of methods to put your money to work, and no one method can be crowned as the best. These methods vary significantly in terms of risk, initial investment required, and the degree of participation needed.
Here are a few strategies that I'm aware of, but bear in mind that there are countless other opportunities that might be a better fit:
1. Consider investing in a high-yield savings account. The term "high" is entirely relative, but these accounts are typically almost risk-free. However, due to their low risk, your annual return could be as modest as 0.01% to 5%, depending on the account type and the firm. While this is a safe option, it's important to manage your expectations. It's a low-effort, low-risk option, so the returns aren't as high.
2. The stock market (you must be 18 or older). Another option is to invest your money in the stock market by purchasing shares of individual companies or smaller portions of a group of companies (usually safer) via an ETF. In both cases, you own a tiny fraction of the company, and if the company performs well, your shares increase in value, earning you money! The more shares you buy, the higher your initial investment, potential profits, and risk. Some companies also offer dividend payments, which can supplement the increase in share price.
3. Real estate! If you have substantial capital, you could invest in real estate properties and wait for their value to gradually increase, or you could rent them out—think traditional rentals, Airbnb, and so on. This requires more involvement in terms of property maintenance, paperwork, cleaning, and so on, but it could be highly profitable!
Keep in mind that there are countless ways to make your money work for you, such as starting a company, investing in sports cards, buying stocks, and more. Keep exploring!
There's a vast array of methods to put your money to work, and no one method can be crowned as the best. These methods vary significantly in terms of risk, initial investment required, and the degree of participation needed.
Here are a few strategies that I'm aware of, but bear in mind that there are countless other opportunities that might be a better fit:
1. Consider investing in a high-yield savings account. The term "high" is entirely relative, but these accounts are typically almost risk-free. However, due to their low risk, your annual return could be as modest as 0.01% to 5%, depending on the account type and the firm. While this is a safe option, it's important to manage your expectations. It's a low-effort, low-risk option, so the returns aren't as high.
2. The stock market (you must be 18 or older). Another option is to invest your money in the stock market by purchasing shares of individual companies or smaller portions of a group of companies (usually safer) via an ETF. In both cases, you own a tiny fraction of the company, and if the company performs well, your shares increase in value, earning you money! The more shares you buy, the higher your initial investment, potential profits, and risk. Some companies also offer dividend payments, which can supplement the increase in share price.
3. Real estate! If you have substantial capital, you could invest in real estate properties and wait for their value to gradually increase, or you could rent them out—think traditional rentals, Airbnb, and so on. This requires more involvement in terms of property maintenance, paperwork, cleaning, and so on, but it could be highly profitable!
Keep in mind that there are countless ways to make your money work for you, such as starting a company, investing in sports cards, buying stocks, and more. Keep exploring!
Updated
Peter’s Answer
You invest it.
Updated
Veneta’s Answer
A good place to start investing can be low-risk, FDIC-insured financial instruments such as high-rate savings accounts and high-interest CDs some of which are yielding over 3-4% now. Locking funds you may not need in the short to medium term can get you a higher return.