What are the benefits and risks? How should I plan my investments?
Investing is about taking calculated risks in return for potential financial gain, such as a secure retirement, sending children to college or just early financial independence.
Investments, like stocks, bonds and mutual funds, have typically (past performance is no guarantee of future results) delivered higher returns over time than interest paid on traditional savings accounts. But the risks of investing compared to a savings account are greater: There is no guarantee of higher returns and there’s the possibility of losing the principal.
Investment professionals generally suggest diversifying your investments to match your financial goals and needs. Key elements of most investment plans include:
- Determine short- and long-term life goals to get a better handle on how much money you will need to meet your financial objectives.
- Designing a diversified investment strategy that can help your plan succeed by keeping up with the changes in your life.
- Determining your personal tolerance for assuming risk and establishing the time-frame within which you expect to meet your financial goals.