Investing 101?—?Save, Invest, Repeat (Part 2/2)
This is Part 2 of a two-part series on how you can start investing. If you have not already, read Part 1 first.
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I understand the topic of personal finance is not exciting. Especially an article on saving and investing for the future, when you can spend the money now. But, want to know what’s less exciting? Not having enough to retire. Ask anyone in their 60’s putting in 8-hour days out of necessity and they will urge you to start now. And how they wished they had made smarter financial decisions. Don’t take your future self for granted. Take the necessary steps today — no matter how small they may feel — to set yourself up.
You do not have to make a lot of money in your life to retire well. Don’t get me wrong, it definitely helps, but it is not the end all be all. In fact, millionaires are disproportionately clustered in middle-class and blue collar neighborhoods and not in more white-collar communities (“The Millionaire Next Door”). Such individuals lived within their means, making it a priority to save and invest.
Anyone can follow the “millionaire next-door” mentality; however, you need to know what to invest in and how. We started answering these daunting questions in the first part of this article. Let’s now proceed to the second and final part, after which you will be equipped with the knowledge to start investing today!
Other Investment Options
There are many types of investments available to you besides the stock investments we discussed in Part 1. The goal is to keep things simple, so we will focus on only two options.
Bonds
Bonds are a fixed income investment where the investor loans money to an entity, which borrows the funds for a defined period of time at some interest rate. It is an IOU — I will give you ‘$x’, which you pay me back in ‘y’ years, while paying me regular interest payments of ‘$z’
There are many entities investors can loan money to. However, our focus will be on bonds....