Unlike saving money regularly, investing in the markets — the act
of buying shares, bonds, or other financial instruments from private
companies or public entities — carries one thing that regular savings accounts don’t have.
Risk.
Unlike a savings account, there’s always the risk of the market not doing well,
which can lead you to lose money.
Lets say you have $1 500 dollars, and you buy shares —
small units of ownership in a private company — in just one single company.
Over the course of a few years, that single company can do quite well!
...or it could get caught in a horrible scandal and lose a decent amount of its value.
So, investing in stock in a single company may be a bit too risky for you.
Are there other options? Luckily, yes!
There are many, but we’re going to focus on probably the easiest one for beginners.
Funds!
Funds are pretty much a big basket of different assets (like stocks) that
people can buy-in on. This is so that they could, for example, invest in many
companies in just one single financial instrument.
One type is a mutual fund, but they’re not too beginner friendly, so we won’t
talk about them here.
Exchange Traded Funds (ETFs) though, are very beginner friendly. They’re
treated like stocks, but each share of an ETF gets you a slice of a whole
bunch of stuff.
There are a few different types of ETFs.
Passive ETFs are ETFs that don’t have an active manager,
unlike an Actively Managed ETF. Passive ETFs tend to follow other broader
indexes, or a specific sector (a Sector ETF).
Bond ETFs, rather than being a a basket of stocks are baskets of Bonds.
These ETFs have a fun little feature where they have what’s called “Fixed Income”,
where a percentage of what you put in gets paid to you every month, ideal for long
term goals.
Wanna compare your options? Lucky for you we can help with that.
Using historical market data, we can help you compare generally your likely
outcomes depending on what you invest in! Our methodologies are up above.