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Investing 101: Investment Options, Accounts, and Strategies

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If you’re interested in learning to invest, you’re in the right place. We know that when you’re new to the game, investing can feel intimidating. Between the different types of investments you can make, accounts you can open, and strategies you can follow, there’s a lot to consider. We’re here to tell you it doesn’t have to be overwhelming. To help get you started, we’re going to break it all down right here.

So, You Want to Invest…Now What?

When it comes to investing, there are several different types of investments you can choose from - basically, you have options. You can choose to purchase any of the following financial assets with the goal of making your money grow over time.

1. Individual Stocks

When you invest in stocks, you’re buying shares—a.k.a. small pieces of ownership in a company. When the company does well, your shares increase in value. Some companies will even pay you a dividend (money the company distributes back to shareholders) for owning shares.

Note that stocks can be volatile—they’re more vulnerable to a loss if a company doesn’t perform well. Therefore, they’re a higher-risk investment. It’s recommended to do your research before buying stock in a company.

The Perk: By investing in stocks, you are awarded with flexibility and the chance of higher returns based on the companies you choose and when you choose to sell.

2. Corporation or Government Bonds

When you invest in bonds, you’re lending money to a company. You receive a reliable return because the company is guaranteed to pay you a fixed amount of interest at fixed intervals. Bonds are a less risky investment because the issuer is legally obligated to repay you. However, while they’re less volatile than stocks, they don’t have as aggressive of growth potential.

The Perk: A more conservative option to investing with the flexibility of choosing the government or company bond you’d like to invest in.

3. Mutual Funds – Leave it to the Pro’s

When you invest in a mutual fund, you’re investing in a collection of stocks, bonds, and other financial assets built and managed by investment firms.

To invest in a mutual fund, you will have to go through the investment company that manages it. Keep in mind, you may need more cash upfront as several investment firms do require minimums when opening a mutual fund. Mutual funds are actively managed by a portfolio or “fund manager” or in other cases – a robo advisor regularly, which usually requires additional fees in return for keeping your portfolio balanced and on track. When using a robo advisor – you are likely to pay smaller portfolio management fees.

The benefit of paying those extra fees is that working with a portfolio manager or robo advisor will save you from doing background research on individual stocks and trading yourself. The portfolio manager researches a set of assets they believe will perform well, purchases them, then assembles them into a fund for you to invest in. Your returns will be based on the overall performance of your mutual fund as a whole.

The Perk: Leave it to the pros. Mutual funds are picked and managed by professionals, making your work pretty light.

4. ETFs (Exchange Traded Funds)

When you invest in an ETF, you’re investing into a basket of securities managed by an investment firm. The primary differentiator is that an index fund passively manages your investments instead of being actively managed by humans. While buying into an ETF may still require a minimum and/or a fee for management, it’s typically lower than an actively managed account. ETF’s can also be traded on stock exchanges. Meaning, you can buy and sell ETF’s throughout the day on different stock exchanges using a brokerage account.

The Perk: You earn dividends based on the entire ETF’s performance as a group rather than one an individual company’s stock.

5. Certificate Account

When you invest in a certificate account, you’re putting funds into your financial institution for a fixed amount of time. While your money is invested, they’ll pay you a guaranteed interest rate. When your pre-determined term is up, you receive your original balance in addition to any interest gained. They’re a very low-risk investment and easy to open—USALLIANCE offers a variety of certificate accounts with different terms to accommodate your ideal length.

The Perk: Certificate Accounts are a safe option that guarantees a return on your hard-earned cash


I Know What I want to Invest in. But How Do I Actually Invest?

To start investing, you will need to have certain kinds of accounts. We’ve already talked about certificate accounts, which are relatively simple to open directly through your financial institution. Below are a few other types of accounts that you could choose to open to get your money growing. Note that several investment firms offer a multitude of options to fit your every need.

1. Retirement Accounts

Traditional IRAs (Individual Retirement Accounts), Roth IRAs, and 401(k)s are accounts designed for your retirement. When you invest in a retirement account, you are essentially buying mutual funds and/or EFTs and allowing them to grow over time. While you can access this money before the age of 59 1/2, there are most likely high penalty fees.

You can open Traditional and Roth IRAs with USALLIANCE Financial! 401(k)s, on the other hand, are workplace-sponsored accounts that may be offered to employees. You can contribute to a 401k via payroll deductions, pre-taxed. The idea behind this, is that you will be in a lower tax bracket once you retire, making the taxes you pay in the long run – less. Some employers will match your 401k contributions (seriously). While there may be stipulations, essentially – it’s free money. Check with your employer if these benefits are available to you.

2. Brokerage Accounts

A Brokerage account is an account through an investment firm where you’ll invest your money, and a registered broker will trade on your behalf. Not all brokerage accounts are the same. There are full-service firms, discounted firms, and many more.

The benefit of brokerage accounts is the option to speak with customer service representatives, financial assistance, and financial advisors for questions and advice associated with your account. This may come with an additional cost depending on your portfolio.

Examples of this: Schwab, TD Ameritrade, Fidelity, Vanguard

3. Brokerage Platforms & Applications, Managed by YOU

Online brokerage platforms and applications are an excellent place for new investors if you don’t have as much money saved up and want to be fully in control of your investments – at all times. The benefit of an online brokerage platform or application is that you can make trades quickly – right from your computer or phone. In this instance, you are the sole manager of your portfolio – choosing whatever options you desire.

Examples of this: Robinhood, Cash App, Webull, Acorns, TD Ameritrade


Now What?

Depending on your risk tolerance, where you’re at in your financial journey, and where you want to invest, you might play with a few different strategies to maximize growth and minimize risk.

1. Risk Assessment

When do you need your money? If you have a lot of time for growth, consider higher-risk investments (an aggressive approach). More risk means more reward. But if you lose in the short term, you have time to build it back. If you have less time, you’ll want conservative, lower-risk investments. If you’re young, experts recommend more aggressive investments. And if you’re older, you’ll want to be more conservative. Age is important because you want a secure amount of money for retirement. If the idea of losing money on investments makes you queasy, take a conservative approach.

2. Diversification

You don’t want to put all your eggs in one basket. You should have a diverse array of assets between stocks, bonds, mutual funds, and ETF’s. Including diversity in industries. Variety helps so that your portfolio is balanced to make up for any losses if one sector is performing poorly.

3. Continual Evolution

The market is constantly changing, so it helps to continue researching and checking in on your accounts. Investing is not a set-it and forget-it ordeal. You can consult online sources, courses, and professionals for guidance. The more you learn, the more informed you will be, giving you a solid background when making decisions.

4. Long Term vs. Short Term

When it comes to investments, you have to think long-term. There may be dips, and there may be trends that are a flash in the pan, but overall, growth is a long game.

Ready to Start Investing? Learn more about your Investment options with USALLIANCE Financial.

Invest in your Financial Future

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