The financial goals you have for the future will likely cost you money, and investing can help you achieve them. The power of compound interest – earning interest on your initial investment, then multiplying that interest at an accelerated rate – can help you generate significant wealth over time. But choosing the right investments and strategies for your unique situation can be challenging.
The key to navigating the investment process is understanding your personal tolerance for risk. You also need to know your timeline and goals — how much do you want to save for retirement or other milestones? Then you can start building your strategy.
An investment is any asset that produces a return. That return can be a capital gain (profit) or loss, realised or unrealised, or it can come in the form of regular income like dividends, rent, or interest.
You can choose from a variety of investment assets, including stocks, bonds and cash or cash equivalents. The ideal asset allocation for you will depend on your financial situation, goals, age and risk tolerance.
A good place to start is with a brokerage account, which allows you to buy and sell financial assets such as stocks, mutual funds, exchange-traded funds (ETFs), and options. These accounts usually have transaction and maintenance fees, as well as commissions on trades.
Another option is to invest in a managed account or robo advisor, which uses algorithms to select and manage investments for you. They can be a great way to get started with investing, but they may not be the best fit for everyone.