How to invest money to make money with a comprehensive financial plan
Investing involves a great amount of careful thought and decision making, but the goal for most people is simple: make as much money as possible within the risk one is willing to take. One person’s investment strategy will look much different than another’s based on financial circumstances, long-term goals, risk tolerance, and other factors. However, there are generally a few broad methods to understand that can help you invest money to make money.
Most people with a bank account are familiar with a savings account. Putting money into a savings account can generate a small amount of interest that can slowly increase your funds. While it is smart to always have some money in savings that is readily accessible and often earmarked as an emergency and opportunity fund, if you want to potentially generate a greater return, you should look to other investments.
Investing in stocks, bonds, Exchange Traded Funds (ETF) or mutual funds provides an opportunity to generate higher returns if you are willing to take additional risk. For example, if you put $1,000 into a savings account now at an assumed interest rate of 0.5%, it will grow to only $1,105 over that 20-year period. However, if you can invest that money instead at a hypothetical return of 6%, your $1,000 will grow to $3,207.
How to invest money to make money
Investing money to make money may look easy, but it is not as simple as picking a stock and putting your money into it. You have to consider what will be best for you personally based on your risk tolerance, asset allocation, circumstances and goals. Deciding how to invest based on these factors makes up the framework for your financial plan.
Developing a financial plan should be a personalized, thorough process that is subject to ongoing maintenance and revision. However, the broad methods many people follow to create returns are:
- The long game — While some people are savvy within the investment landscape and are comfortable taking major risks with investments that can potentially yield high returns in a given year, others are not comfortable with such risks. However, if you are willing to invest for the long-term in a solid, diversified portfolio, you will likely reduce the risk and produce an acceptable rate of return that meets your needs.
- Avoid playing the market — It may be possible to day trade successfully if you have the time, inclination, temperament, and knowledge to do so. However, most people do not have these necessary attributes. The markets are very fickle and can punish an investor severally in the short run. Others try to time the market by selling when they think the market is too high and buying back when they think it is low. No one has ever done this successfully on a repeated basis. It isn’t market timing that makes a difference, it is the time you are in the market that makes a difference.
- Investing in a retirement plan — If your goal is to save up money you can use when you are ready to stop working, you should invest in a retirement plan like a 401(k), traditional IRA and Roth IRA. . You will not be able to access these funds until you have reached the age of 59 1/2 without penalty (although there are some exceptions) but your investment will grow and provide you with significant tax benefits..
Making smart investment decisions with the help of a ProVise financial advisor
Are you interested in investing money to make money? Who would not be? Still, making the right investment decisions can be difficult when you do not know where to start. Fortunately for you, we do.
Our CERTIFIED FINANCIAL PLANNER™ professionals are highly skilled in navigating the fiduciary landscape to help you assess your circumstances and reach your goals with a personalized financial plan. We develop plans at a fiduciary standard of care that is backed up by our unconditional money-back guarantee – if you are unhappy with the written plan, simply return it to us and we will refund 100% of the fee paid.
Are you ready to talk to a ProVise Management Group financial advisor about making wise investment decisions? Contact ProVise today to schedule a complimentary consultation.