May 25, 2022

What is Investing and How Does It Work?

Keep these strategies in mind when considering any investment.

What is investing and why is it important?

Many people think of investing as “putting money to work”. In the most simplistic sense, investing is essentially buying an asset at a low price and selling it at a higher price in hopes of creating profit. Investing is important because it is one of the most common (and practical) ways to build wealth for yourself.

With risk comes return

In investing, risk comes with return (or reward) and varies from person to person. Given that, high risk comes with potentially higher financial gain, and low risk comes with expected lower financial gain. Although every investment comes with some uncertainty, investing your money is usually a smart decision and will only come to benefit you in the long run.

Common investments people make

Two of the most common types of investments are stocks and bonds. When you purchase a stock, you buy a share of that company and become a partial owner. The profitability of the stock entirely depends on the success of the company, meaning that stock investments can come with a bit of risk and chance. On the other hand, bonds are considered to be a more stable type of investment. Bonds are essentially “loans” that are typically given out by governments that build interest over time and are repaid by a specific date.

How to start investing

The first step to beginning any investment is to determine how much money you want to invest and can continue to invest. Meet with a financial planner and receive professional investing advice to construct a plan that is tailored to you and your needs. Make sure that you understand the benefits and risks of the investments that you decide to make. It is also a good idea to have a diverse portfolio so if one investment doesn’t go as planned, you have others to fall back on.

At first glance, investing can seem a bit overwhelming. It’s important to recognize the benefits and commonalities that come with the process of investing. At Citizens First Bank, we find value in creating an investment plan that works best for you. Feel free to stop in, give us a call, or visit our website to schedule a meeting with one of our financial planners today.