Investments are a great opportunity to build a nest egg and save for the future. The three main types are stocks, bonds and cash investments; however, it’s important to note that investments can come in many forms such as buying a house, owning an art collection or gathering a selection of rare coins. Building a diverse portfolio can help you prepare for the future.
At the core, investing in a stock represents purchasing a percentage of ownership in a company. As long as a company is publicly traded, you can buy and own shares. As the company grows, the stock becomes more valuable. The opposite is also true; if the company is struggling, the share will decrease in value.
Investing in stocks can be risky. It is possible that the company in which you have invested could be mismanaged and you may lose your investment. To minimize risk, it’s a good idea to talk with an advisor before investing and think about diversifying your assets – don’t put all your eggs in one basket, so to speak. Oftentimes, young folks who are years away from retirement will invest in high risk companies in hopes of a big reward. As you near retirement, you may choose to invest in companies that have a more stable return, but these investments usually yield a smaller return. Deciding on investments is very personal, and everyone has a different approach.
When you buy a bond, you are essentially loaning money to the government or organization that issued that bond. The rate of return will vary depending on the interest agreed upon at the time of purchase. Return earned from a bond is essentially interest garnered from a loan. Similar to stocks, certain bonds can be riskier than others and generally, the greater the risk, the higher the potential return.
Finally, cash investments may come in the form of savings accounts or interest-bearing checking accounts. These types of investments are typically considered to be a way to save money without the risks associated with stocks and bonds. These types of accounts are a good, low-risk way to invest in your family’s future. While as a parent you may be focused on retirement accounts, it’s important to think about your child’s college savings fund.
The North Carolina College Savings Program, also known as an NC 529® account, can be a valuable asset to your portfolio. This tax-advantaged way to save for your child’s future only requires a $25 contribution to get started. As your child grows, friends and family members can contribute to the account for birthdays, holidays and other special occasions. That way, when the time comes for your child to head off to college, they will have the financial support they need to succeed.
Ready to start saving? Enroll in an NC 529 account now.