When planning for retirement or expanding personal wealth, it is critical for individuals to create a diverse and well rounded portfolio. Simply depositing your savings into a bank will do little to grow your nest egg, and in some cases may shrink your purchasing power due to inflation. On the other hand, putting too much into high risk, volatile investments such as stocks can cripple your finances before they have a chance to flourish. Furthermore, users should be wary of penny stock and internet scams that attempt to prey on inexperienced investors.
Despite being the most risky investment strategy, stocks are also the most lucrative. For younger investors capable of absorbing the ups and downs of the market, stocks can be ideal.
For those who are uncomfortable with the volatility of stocks or simply do not have the time to research, mutual funds allow individuals to purchase a diversified portfolio of stocks managed by an industry professional. For a small management fee, buyers can take advantage of the market’s gains with significantly less risk. Furthermore, mutual funds are offered in a variety of different packages, from aggressive growth funds to more conservative bond funds, allowing each user to purchase the vehicle that best suits their needs.
Depending on the market, real estate can be an excellent way to quickly build equity while providing you a safe and secure place to live. With mortgage payments deductible from your taxes, owning a property comes with a slew of financial advantages beyond the value of the home.
One of the key methods for any individual looking to save for retirement is a company sponsored 401k. These contributions are often matched up to a specific dollar amount by your employer, and over time can make for a significant portion of your retirement fund. Other retirement investments such as Traditional IRAs can be deducted from your income, growing tax-free and paid when you retire. For those who wish to avoid taxes altogether, a Roth IRA provides tax-free growth and distributions, albeit it is not tax deductible.
Stocks, Mutual Funds, and Retirement accounts can all be purchased with the ease of online trading. Unlike traditional channels which may involve large brokerage fees, online investing provides cheap transactions with little to no hassle. However, as the internet is largely unregulated, it’s important to be sure you invest with a reputable company.