Investing 101

Start with the basics of investing. Investing can be intimidating but let's break down some common terms so you can get started on your path to a lifetime of wealth!



Does investing scare you? Are you unsure of where to start? Do you feel like there's wayyy too much info out there? Or maybe you feel like you can't really find enough info before you start. Investing seems to be one of those things that a lot of people are talking about right now but no one seems to be sharing the knowledge you need to actually get started.


Just like money itself, investing is also a huge part of life. Investing can make your money work hard for you instead of you working hard for your money for the rest of your life. Let's pause though because chances are you already have some money working for you. If you have and are investing in your companies 401k, then CONGRATS! You're an investor! See, it's not so scary (if you don't have a 401k, that's okay too, there's still hope for you).

So let's dive into the basics here and get a simple overview of some common investing items like account types and the different investment options like stocks, bonds, mutual funds, and ETFs (keep in mind these are not your ONLY options, just some common ones available to you).


401k

• Mainly used for retirement savings

• Opened through your employer.

• Usually pre-tax but can be a Roth (post-tax).

• Don't have to pay tax on the money until you withdraw it.

• There may be a penalty for withdrawing early.


Traditional IRA

• Mainly used for retirement savings

• Opened personally online.

• Pre-tax money

• Don't pay taxes until you withdraw the money.

• May be a penalty for withdrawing early.


Roth IRA

• Mainly used for retirement savings.

• Post-tax money.

• Can take contributions out tax and penalty-free.

• Earnings may be taxed when you withdraw the money.

• Possible penalty for withdrawing the earnings early.


**Learn more about Traditional and Roth IRAs in THIS ARTICLE.


Brokerage Account

• General use.

• Opened personally online.

• Taxable account: meaning you may pay taxes each year on the earnings or dividends, even if you don't take out any money.

• No penalties when you withdraw money and can withdraw whenever you want.


Alright, so once you pick the account that's going to work best for you and your goals, you can start filling it with the exciting stuff - the actual investments! Let's take a look at some of the common investments you could own. Again keep in mind, this list is not encompassing of all the options available to you, just some of the common ones.


Stocks

• Part ownership in a company.

• Stock owners can be rewarded in dividends or by the stock increasing in value (the stock price rises).

• Can be seen as risky (when compared to bonds).

• Can be traded throughout the day and is priced continuously throughout the day.


Bonds

• Loaning your money to a company for a certain period of time at a certain interest rate.

• Can be seen as less risky (when compared to stocks).


Mutual Funds

• A pool of stocks, bonds, and cash equivalents in one investment vehicle (so each share is diversified).

• Can be actively managed (usually with a higher fee) or passively managed (can be called an index fund) meaning it may not rely on human intervention (usually with lower fees).

• May follow a certain index or benchmark automatically. For example, an S&P 500 index fund will track the S&P 500. So whatever companies currently make up the S&P will be the stocks inside that mutual fund.

• Mutual fund shares are priced only once per day (after market close). So if you place a trade first thing in the morning, it won't go through until the end of the day.


ETFs

• Stands for Exchange Traded Fund

• Pretty much a mutual fund but it trades more like a stock. So it can be traded throughout the day as it's being priced continuously. This gives you more control over what price you buy and sell at.


Please remember, these are just the basics. Let me know if you'd like to see an article that dives deeper into a certain aspect of this. I know it seems like a lot but the more you spend learning about this stuff, it will eventually start to click.


& if this article was at all helpful to you, chances are people you know would get just as much use out of it! Please feel free to share with friends and family - I'll be forever grateful!


xo,

Madison


P.S. My 1:1 Money Coaching Program is currently LIVE! Check it out HERE.



DISCLAIMER: This is not financial or tax advice. Please consult a professional before making any investment or tax decisions. Returns are not guaranteed. Different investments result in different returns. Investing involves risk and possible loss of money. Information in this article may become outdated. Do your own due diligence before investing. The information contained in this article is for informational and entertainment purposes only. Read my full disclaimer HERE.

  • Instagram

© 2023 Proudly created with Wix.com