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Money and Finance

Investing

What is investing?

Investing is a way to have your money work for you. Rather than hide your money in a safe or under your mattress, you can put that money to work at a bank or a business.

Growing Your Money

The main goal of investing is to grow your money. For example, when buying stock in a company you hope that the company will be successful and the stock will be worth more in the future than it is today.

Risk vs. Reward

Most all investments have some risk. You could end up with less money in the future than you do today. Some investments are riskier than others, but usually the more risk you are willing to take, the more money you could make.

For example, a federally insured CD with a bank is not very risky. The bank promises to pay you a certain percentage over a given amount of time. Even if the bank goes out of business, your money may be insured by the federal government. This sounds great, except CDs today only pay a few percent each year. This isn't a lot of return on your investment.

A higher risk example would be stock in a new technology company. If this company takes off, your money might go up 10 times in the next few years. However, the company could also go out of business, making the stock worthless and you would lose all your money.

Types of Investments

There are a lot of types of investments. Here are a few of the more common investments people make:

Stocks - Stocks represent ownership in a company. You can buy stock in all sorts of companies like Coca Cola, Apple, and Walmart. The hope is that the company will be profitable and grow. Then the value of the stock will go up and your money will grow, too.

Mutual Funds - Mutual funds are like stocks. A mutual fund represents a group of stocks. When you buy a mutual fund you are investing in a group of stocks. This is a way to invest in a number of different stocks, but not have to buy a bunch of individual stocks.

Bonds - A bond is sort of like a loan. When you buy a bond you are lending your money to a company or government. Bonds can pay higher interest than a bank account, but also come with more risk.

Real Estate - A lot of people invest in real estate. This can be buildings or land. The biggest investment many people make is when they buy their home.

Bank - One of the most conservative investments is with the bank. This might be with a savings account, a money market account, or a CD. With the bank you get some security, but the return is low.

Gold - Precious metals such as gold are often used as investments.

What does diversify mean?

One thing that many financial advisors will tell people is that they should diversify. This means to invest in a variety of areas. Rather than put all of your money into one stock, invest in a variety of investments such as stocks, bonds, and mutual funds.

Interesting Facts About Investing

Learn More about Money and Finance:

Personal Finance

Budgeting
Filling out a Check
Managing a Checkbook
How to Save
Credit Cards
How a Mortgage Works
Investing
How Interest Works
Insurance Basics
Identity Theft

About Money

History of Money
How Coins are Made
How Paper Money is Made
Counterfeit Money
United States Currency
World Currencies 		Money Math

Counting Money
Making Change
Basic Money Math
Money Word Problems: Addition and Subtraction
Money Word Problems: Multiplication and Addition
Money Word Problems: Interest and Percent

Economics

Economics
How Banks Work
How the Stock Market Works
Supply and Demand
Supply and Demand Examples
Economic Cycle
Capitalism
Communism
Adam Smith
How Taxes Work
Glossary and Terms

Note: This information is not to be used for individual legal, tax, or investment advice. You should always contact a professional financial or tax advisor before making financial decisions.

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