Investing has the potential to generate much higher returns than savings accounts, but that benefit involves risks, especially over shorter terms. If you're saving for a short-term goal and will need to withdraw the funds in the near future, it's probably best to leave the money in a savings account. investing is an effective way to put your money to work and, potentially, to generate wealth. Smart investing can allow your money to exceed inflation and increase in value.
A life cycle fund is a diversified investment fund that automatically switches to a more conservative investment mix as it approaches a certain year in the future, known as a deadline. When you invest regularly, you not only take leaps and bounds to secure your financial future, but you also increase your wealth year after year. Investors must also understand that holding an equity portfolio, even for an extended period, can generate negative returns. Developing a basic knowledge of how investing works is crucial to understanding the appropriate next steps to secure your financial future through value investing techniques.
Even insured and conservative investments, such as certificates of deposit (CDs) issued by a bank or credit union, carry a risk of inflation. Before you decide which investment vehicles are right for you, it will be helpful to know what they are, how they work and why they may be right for your needs. Conversely, investing in a money market or savings account probably doesn't offer the same potential for returns, but is considered less risky than investing in stocks. Phil Town is an investment advisor, hedge fund manager, three-time best-selling author of the NY Times, a former guide to the Grand Canyon River, and a former member of the United States Army Special Forces.
The ideal is to ensure that the money you invest is capitalized as best as possible to get the most out of your money. So, while funds with a target date are generally designed to be more conservative as the deadline approaches, investment risk exists throughout the life of the fund. While stocks have historically offered higher returns than bonds and cash investments (albeit with a higher level of risk), it's not always true that stocks outperform bonds or that bonds have a lower risk than stocks. Investors who hold individual shares for an extended period also run the risk of the company they invest in going into a state of permanent decline or filing for bankruptcy.
