In this week's readings I learned about the investment process. Investment is defined as committing funds to grow over a long period of time. The purpose of investing in something is to grow and maintain wealth. One type of investment is stocks, which represent ownership in a company. For instance, if you own a share of Apple stock, you own a part of Apple. Stocks rise and fall, often making them unpredictable investment opportunities. Some tips when investing in stocks would be to buy and hold through the ups and downs rather than sell, keep buying and selling costs of stocks low, and invest in quality companies. Another type of investment is bonds which are investments that involve lending money. Investing in a bond for a corporation would mean you lent money to them for a project or new building opportunity. Bonds are considered safer than stocks and the rate of return is guaranteed in many cases. Mutual funds are groups of investments which make them great for retirement savings opportunities because buying one share of a mutual fund means buying a small amount of multiple holdings which in turn spreads the chances of growing wealth. Some advantages of investing in mutual funds using a broker include professional management and knowing research would be done and funds would be monitored, funds can be liquidated and redeemed for cash however possible fees may be included, and the fact that many funds set small amounts for initial purchases. Some disadvantages include management fees, taxes, and having managers control which stocks are in funds can be difficult for investors when investing in mutual funds with a broker. Investments in real estate include owning your own home, apartment buildings, raw land, or rent houses. Investments can be made by one person or a group of people having a share in a piece of property. Investing in a franchise such as Starbucks, gives an investor the right to operate a business and sell the products or services of the franchise. Investment risk is reduced when you are associated with an established company which can be beneficial, however, you would have to conform to the standards of the franchise and essentially give up individual control of decisions. I also learned about some of the strategies for beginning investors. Some questions to ask yourself include Why should I invest? and How much should I invest? Investing can help you reach financial goals like saving for your child's college and wedding funds or saving a nest egg for retirement. A smart choice is to invest about 10% of your income towards future financial goals and to start early and make investing a habit so that you can build up a lot over time. It is also important to know the basic types of investments which include stocks, bonds, and mutual funds which I stated early along with cash. Cash investments are low risk but they are also low in return, whereas a savings account can accrue interest over time. Choosing between stocks is also important for investment beginners. Once you have decided on a plan, researching brokerages and opening up a brokerage account is the final step for beginners. I learned about some things to consider prior to retirement as well. Having a retirement plan aside from relying on Social Security is important because unforeseen circumstances such as an injury or illness can put you on an early retirement track before your are eligible for Social Security benefits. Saving for retirement is also important for people to consider so that they do not have to rely on others to care for them financially once they retire. Often when people retire, they realize retirement benefits are not enough and in order to make ends meet they will have to continue working past the usual retirement age. Not planning for retirement financially can also land you in debt if you spend too much money while working and fail to save for the future. 

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References:

Goldsmith, E. B. (2016). Consumer economics : Issues and behaviors. ProQuest Ebook Central

       https://ebookcentral.proquest.com

Rose, J. (Jan. 27, 2017). 9 Financial Advisors Share What Happens When You Don't Save For Retirement. Retrieved on Feb. 9, 2020

       https://www.forbes.com/sites/jrose/2017/01/27/9-financial-advisors-what-happens-when-you-dont-save-for-retirement/?sh=6e9f621e7ff3

Motley Fool Staff. (Aug. 19, 2017). Our Guide to Investing for Beginners. Retrieved on Feb. 9, 2021 from 

       https://www.fool.com/retirement/2017/08/19/our-guide-to-investing-for-beginners.aspx

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