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August is National Investors Month

08/23/2022 Written by: Jenny Boudreau

Successful investors start with the basics. And what better time to get started than during National Investors Month – a month dedicated to highlighting the importance of financial literacy and planning for your future.

Saving and investing are two different things. Typically, saving means the money has a lower risk of losing value and is available when you need it. When you save, you usually put money into savings accounts, checking accounts, and certificates of deposit.

Investing is usually for long-term goals, such as building wealth, retirement, and your child’s college education. Investing in securities, mutual funds, or similar investments may provide an opportunity to earn more. The most significant difference between saving and investing is risk. When you invest, there’s potential for long-term gains but also potential for loss.

Having enough money, such as six months of income in savings, to cover an emergency is essential, but the low interest common for savings accounts may prevent your savings from keeping up with inflation. It's one reason people put money in savings but look to investing as a way to earn more over long periods of time.

Choosing the appropriate savings and investment products requires a complete understanding of your current situation:

  • What goals do I want to achieve?
  • How much do I need to achieve my goals?
  • How much can I afford to invest?
  • What is my risk tolerance?

Before making any investment decisions, it is best to  understand the risks and make sure the risks are suitable for you. In addition, it is important to understand the fees associated with buying, selling, and holding the investment.

Whether you're a first-time investor or have been investing for many years, you should ask some basic questions before you commit your money to an investment.

  • Is the seller licensed? Check the background of anyone promoting an investment opportunity.
  • Is the investment registered? Any offer or sale of securities must be registered with the SEC or satisfy a specific exemption from registration. Registration is important because it gives investors access to key information about the company's management, products, services, and finances.
  • How do the risks compare with the potential rewards? Investments with greater risk may offer higher potential returns, but they may expose you to greater investment losses. Keep in mind that every investment carries some degree of risk, and no legitimate investment offers the best of both worlds.
  • Do you understand the investment? If you can’t understand the investment and how it will help you make money, ask a trusted financial professional for help. If you are still confused, you should think twice about investing.
  • Where can you get help? If you have a question or concern about an investment, please contact the SEC, FINRA, or your state securities regulator for help.

All investors should be vigilant in protecting their investments from fraud. Victims have been targeted using an array of psychological techniques. Watch for the following red flags:

  • It sounds too good to be true
  • “Guaranteed returns”
  • The “halo” effect, which makes criminals seem likable or trustworthy
  • “Everyone is buying it”
  • Pressure to send money right away
  • Small favors, such as free lunch or workshop

Investors can have many different investment and savings goals.From saving for education to retirement planning to simply building a nest egg. An investment plan can help keep you on track and improve your chances of achieving your goals. Contact a financial professional at AssuredPartners Investment Advisors to learn more.

Source: Investor.gov

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