Investing can certainly seem like a daunting, risky endeavor….but then again, we assume all kinds of risks everyday. You commute to work, don’t you? Whatever mode of transportation you use, you’re likely taking a risk that the conductor will get your train safely into the city or that your car won’t be in an accident along your route. You also likely risk your personal security by posting your whereabouts on social media (#guilty). You see, life is not about avoiding risks – in fact, that’s nearly impossible. Instead, the goal is to minimize the level of risk taken while maximizing the return.
That’s what we, as financial advisors, do with the stock market. We work with clients to understand their risk tolerance and build portfolios to match. We understand that there are some risks you take by investing your money so we aim to diversify (read: spread the risk around) as much as possible to give you some level of comfort and protection.
We also understand that everyone is different and has a completely different level of comfort with investing. Our job is to act as a fiduciary (which means, we act in your best interest at all times) and we take that responsibility very seriously.
So …why should YOU open an investment account?
- To protect yourself against inflation
- To afford your future
- Because you CAN
Protect Yourself Against Inflation
Did you know that the U.S. dollar inflates by roughly 3% a year? That means that the cost of your daily expenses (i.e. groceries, gas, non-fat vanilla lattes) will also rise over time. If you’re not investing your money, there’s a very good chance that you won’t be able to keep pace with inflation and that your money won’t be worth as much in the future.
Investing your money is a great way to hedge against this inflation. You may think you’re in the clear by stashing your hard-earned cash in the bank, but this money only earns about 0.1% of interest on average. In other words, this money isn’t growing. Conversely, the average annual return of the stock market since it’s inception in 1928 has been about 10% (7% when you factor in inflation).
You might be wondering, “But wait! What if I lose money? Surely, I can’t lose money in the bank so shouldn’t I just keep it there?”
While it certainly is true that you won’t lose the money you put into the bank, you can be sure that it won’t be able to keep up with inflation. And yes, while the stock market does fluctuate on a daily basis, over the long-term, you will be much better off. The key is to invest wisely (with the help and active guidance of a financial advisor) and to invest according to your risk tolerance/financial goals.
Afford Your Future!
If I had to guess, I’d say that most of you are hoping to retire someday. The thought of waking up without an alarm and enjoying my morning coffee with the ocean as my backdrop? Yep …that’s what keeps me hustling these days! We all have different ideas and dreams of what our retirements might look like but if you don’t plan for this, those dreams may never become your reality.
If you already have contributed to a retirement account such as a 401(k), 403(b), or Roth IRA, then congrats! You’re ahead of the game! For those of you who haven’t yet been able to prioritize your retirement, then consider this the “sign” you needed. See, in order to afford your future and live out those retirement dreams, you’ll need income long after you’ve stopped working. While saving money all of these years will help, keep in mind that you may need significantly more money that just your stash of cash under the mattress or those Savings Bonds your grandparents gave you when you were young. It is important to open retirement accounts and investment accounts in order to truly allow your money to appreciate and keep pace with inflation.
Here’s a common investing myth: Just because you open one of these accounts doesn’t mean that you need to aggressively invest.
Your advisor will work with you to appropriately invest the money in accordance with your goals while also keeping in mind how much time you’ve outlined before you’d like to retire. You’ll form a strategic plan and then thoughtfully invest your money in order to achieve your desired outcome.
Finally, you CAN do this!
You don’t need to be an expert in the stock market or even have time to set aside to actively manage your money. The reality is, most individuals have no background in managing money and certainly don’t have the time to devote to keeping track of every little thing. That’s where we come in!
Financial Advisors can help you open investment accounts, build a portfolio that aligns with what you need, and will manage it accordingly so that you don’t have to. Essentially, we are doctors for your financial health. We’re here for you, have your best interests in mind, and can help set you up for financial success.
Ultimately, the decision to invest is a personal one and is certainly not to be taken lightly. That said, if done correctly, it can be a wonderful vehicle to help fund your future and provide for the life you’ve always imagined.
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