In the past month, the stock market has been volatile due to several factors. Those factors are based upon the investor’s psychological fears of Ebola, world economies, oil prices, and the upcoming elections. More than 40% percent of people between the ages of 25 and 70 say in a survey they will never invest for fear of losing their money. These are warranted fears, but to tell you the truth, if you want your money to grow while you sleep you must invest. According to USA Today, 50% of middle-class adults in their 50s say they will work until they are at least 80 years old because they will not have enough money saved for retirement.
There are two ways to make money – work or invest. Investing generates money by earning more interest than you could work and save for yourself. It is the key to building wealth.
Investing is also a spiritual principle. Ecclesiastes 11:1-2, 5 says, “Cast your bread on the surface of the waters, for you will find it after many days. Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth. Just as you do not know the path of the wind and how bones are formed in the womb of the pregnant woman, so you do not know the activity of God who makes all things.” The main point is to diversify (cast) your investments because you do not know the works of the Almighty God. No one knows how God is changing the world economy. One country experiences exponential growth while another country experiences a deep recession. A successful investment strategy accomplishes three main objectives: diversification, long-term focus, and continuity. Investing is a slow, grinding, and even a dull process. Long term investing minimizes risks, which allows your investment to go through the up and down cycles of the economy. Below are some different investments vehicles for you to consider.
The savings account. A savings account is an easy method to put money away for a short period of time or even for emergencies. The interest on a savings account is not all that terrific, but it is a great way to have money available (liquid) for emergencies or planned expenses. Within a savings account, you can move up to a Certificate of Deposit (CD) or Money Market account which gives a greater interest rate.
Bonds. Bonds are actually good for the instability of the economy, especially if you do not like risks. Good bonds will hold your principal balance neutral and allow you, the investor, to lend certain amounts of money to a company, bank, or government agency for a predetermined time in exchange for income. Bonds can be secured through an investment firm, bank, government, or corporation. The company or bank pays you interest in exchange for your investment. Governments use bonds to finance major projects such as parks, recreation facilities, and highways. Companies use bonds to finance research and development for major products. Bonds are secured loans that have a specific time period. They pay at a higher interest rate than a regular savings account. Investors use bonds near the end of their working career to prevent fluctuation of value in their retirement account.
Stocks. Stocks are the most common instruments traded today. Buying stocks simply mean that you are buying ownership into another company. Rushing to buy a stock is risky, without doing the proper homework. To avoid the risk of losing money on a stock, conduct research on companies that have a long-term focus. A long-term focus enables you to buy into high-quality companies, which are those that have a vision for their product, advantage over their competition, and new technology that will increase future revenue. Long-term investing enables a stock to go through the roller-coaster cycle of a company’s performance. Investing in stocks individually will not build your assets quickly. Stocks should be a complement to your 401(k) or IRA portfolio. Seek wisdom as you invest; money can be squandered by making the wrong choices.
Mutual Funds. Mutual funds are one of the best alternatives and can double your growth over stocks each year. Unlike stocks, you do not own a stake in the company’s fund. A mutual fund is a collection of companies owned by investment firms that invest in another companies’ stocks, bonds, real estate, etc. They are easy to invest because you don’t need a large amount of money, as opposed to stocks. Mutual funds provide instant diversification among many companies and are easy to sell.
People Funds. Investing in people is the best type of funding because there is a return on your investment. People investing can be paying for college, paying off a loan, or volunteering in a shelter where people directly benefit. Once you start investing in people, you will see the principle found in Luke 16:12 come to life: And if you cannot be trusted with the things that belong to someone else, you will not be given anything of your own. This principle is the highest form of investing because you have used your resources and talents wisely for someone else.
Step into the game NOW! If you have not invested before, start with $25 per month and increase that amount as your budget allows. Find a certified financial planner to help you with financial goals. Excellent planners will recommend books to increase your financial knowledge and challenge you to achieve your personal and professional goals. Whether your goals are to send your kids to college or retire, investing will get you there. A great website with non-biased reviews is www.investopedia.com. The iconic Warren Buffet says, “You don’t have to be a genius to invest well.”
Leave your legacy daily!