Socially Responsible Investing: Aligning Your Investments with Your Values
Whether it’s from a bonus at work or a tax refund, new money is best invested in paying off high-interest debt. But what if you’re interested in investing that money for long-term growth?
The answer depends on your investment time horizon and risk tolerance. But there are plenty of beginner-friendly options to consider. Discover more at where to invest.
Stocks
Stocks (also known as equities) are an important part of many investors’ portfolios. They represent partial ownership of a company and can generate positive returns in the long term if companies perform well. However, stocks are also risky investments that can lose value in the short term. To minimize these risks, you should invest in diversified stock portfolios.
You can start investing in stocks by opening a brokerage account with an online broker. Compare brokers’ fees and minimums, investment choices, customer support and mobile app capabilities to find the best fit for your goals.
You can also open a custodial account for minor children to invest on their behalf. Once you have a plan, assess your financial cushion and personal risk tolerance to create a realistic investing timeline. This process should be repeated over time to ensure that your investment strategy aligns with your life’s circumstances. You may need to adjust your level of risk as you get closer to retirement or as your finances and career change.
Bonds
Nearly every balanced portfolio should include bonds, which are debt investments that promise to return your principal at regular intervals with interest payments. There are many types of bonds, including corporate and municipal. Corporate bonds are loans taken out by companies and municipal bonds are loans to state, county or local governments. They provide a source of income that can be used to supplement other sources of retirement income, such as Social Security and pensions.
Bonds are considered less risky than stocks and can help to smooth out the ups and downs of a stock market. They also provide a steady stream of income that can be spent or reinvested. To choose the right bonds for your investment goals, consider your risk tolerance and your investment time horizon. Also, pay attention to macroeconomic factors, like interest rates, that can affect bond prices.
Real estate
Real estate is a cornerstone of wealth-building, offering a steady stream of passive income and potentially hefty profit margins on resale. But like all investments, it’s governed by a spectrum of advantages and limitations.
One way to invest in real estate is by purchasing rental properties directly. However, this can be a labor-intensive investment and requires significant time and cash flow. In addition, the property may require a lot of repairs and maintenance. Another option is to invest indirectly by investing in real estate funds. These include real estate exchange-traded funds (REITs), real estate mutual funds, and real estate investment groups.
Another popular method of real estate investing is wholesaling, in which investors earn fees by scouring the market for under-market homes and contracting them on behalf of others. This approach requires hard work and knowledge of local markets, but it can be more lucrative than direct purchases. It is also more liquid than investing in physical property.
Money market
The money market is the financial system’s low-volatility segment for short-term lending and borrowing. It consists of banks that lend to and borrow from each other, and also investors who hold money market instruments like commercial paper and repurchase agreements. These instruments are typically backed by liquid assets, such as cash or short-term Treasuries.
Investors can invest in the money market directly through a bank savings account, a certificate of deposit (CD), or money market mutual funds. While these investments are considered safe, they don’t offer much in the way of return. Moreover, some of these investments may be subject to taxes.
Before investing in a money market fund, it’s important to read the prospectus or summary prospectus, if available, and consider your investment objectives, risk tolerance, and goals. You can find these documents by visiting a brokerage firm’s website and searching for “money market fund.” These documents usually contain important information about the fund, such as its investment objectives, risks, and charges.