Basics Of Investing

Basics Of Investing – Getting Started Is Easier Than You Think

Knowing how to secure your financial well-being is one of the most important things you’ll ever need in life. One of the biggest misconceptions about securing your financial future is that you have to be a financial genius. Another is that investing requires you to be a multi-millionaire. In actuality, you just have to educate yourself, craft a plan and stick to it. The purpose of this guide is to give you a general overview of the basics of investing so that you can make informed investment decisions with our help.

There is no guarantee that you’ll make money from investments you make. But if you get the facts about saving and the basics of investing and follow through with an intelligent plan, you should be able to gain financial security over the years and enjoy the benefits of managing your money.

What Is The Basics Of Investing?

The Basics Of Investing is the proactive use of your money to make more money, or the act of putting your money to work for you. While it does involve some risk and could lead to loss of principal (the amount
 you invested), investing offers a range of options that can offer some comfort to even the most conservative investors. It’s important to work with an advisor, whom you trust, and to be fully aware of the risk and what steps you can take to mitigate it.

The key to financial security is to have a financial plan. You’ll first need to figure out where you’re starting from – for example, how much you owe and how much money have you saved. Then set your goals. Do you want a car, a college education for your children, or a comfortable retirement? Once you know what you want, when you want it, and how much it costs, we can help figure out how much you’ll need to save.

Before investing, we can together:

  • List and prioritize your financial goals
  • Take inventory of your current financial situation
  • Pay off high-interest debt
  • Build an emergency fund
  • Create a budget
  • Make a habit of paying yourself or your family first
  • Look for opportunities to cut back on expenses

Basic Types of Investment Products


A stock is an ownership share in a corporation. Each share denotes a part of ownership for a shareholder of that company. Stocks are traded all over the world on exchanges, such as the New York Stock Exchange (NYSE). Investors can buy a share in a company or a share of a diversified global portfolio of stocks.


Although you may be more familiar with stocks, the bond market is actually larger. A bond is a debt that companies and governments offer to investors to raise money. In exchange, investors are promised a return on their investments in the form of interest.

Cash And Cash Alternatives

Cash and cash alternatives are also referred to as money market or cash investments and are considered the least risky of the three basic investment types. They also tend to produce the lowest returns over the long run. These investments may be an option for investors who desire liquidity (the easy buying and selling of investments).

Mutual Funds

Essentially, mutual funds are a grouping of individuals (or institutions) who invest their money with a company that manages that pool of money on their behalf. Mutual funds are appealing because they provide stock market diversity with a modest amount of cash. An investor can send a small amount of money to a fund company and become a stakeholder in a number of companies. Mutual funds have become extremely popular, acting as vehicles for retirement and education planning.

The Benefits of Investing in Mutual Funds

  • Daily Liquidity
  • Low Barrier of entry
  • Immediate diversification
  • Professional Money Management

Choosing An Appropriate Investment Mix

Choosing an investment mix is contingent on factors such as your time horizon and risk tolerance. When will funds be needed? Generally, a relatively short time horizon calls for a more conservative approach, while long-term investments allow more aggressive investing to take place. We will work with you to develop the appropriate mix of investment vehicles based on these factors and your overall financial situation.

Timing The Market Vs. Time In The Market

Timing the market is a strategy in which an investor tries to identify the best times to exit and enter the market, usually based on an outlook of market or economic conditions. Your fate depends on your ability to know when to get out of the market and when to get back in. If you time it right, timing the market could result in higher returns than a long-term strategy. If you are wrong, however, it could result in greater losses. Because markets can be difficult to predict, a long-term investment strategy that utilizes asset allocation and diversification is recommended to avoid unnecessary risk. The coupling of time with an impressive long-term investment strategy can put even the most daunting goals like retirement in reach.


Compounding is the practice of generating earnings from previous earnings. In other words, you receive interest not only on your original investments, but also on any interest, dividends and capital gains that accumulate—so your money can grow faster and faster as time passes. This is particularly evident in retirement accounts, where principal is allowed to grow for years tax-deferred or even tax-free.

Dollar-Cost Averaging

A long-term investment approach allows you to participate in dollar-cost averaging, which is buying a fixed dollar amount of a particular investment at a certain time on a consistent basis. Often recommended for new investors who have less to invest, it rests on the notion that more shares are purchased when prices are low, and fewer shares are purchased when prices are high. Dollar-cost averaging is not an appropriate short-term strategy.

Consider Asset Erosion

In order to maximize your returns, you should consider the effect that taxes and inflation can have on what you actually get to take home.


Inflation can potentially erode the real value of your investments if you have a longer investment timeframe. However, we can calculate the rate at which prices are expected to rise, which can inform your investment decisions by telling you what return your investments need to make to maintain your standard of living.


Tax is a fee charged by the government on a product, income or activity. An account is taxable 
if any income earned in the account is taxable at the time of earning. Investments held in taxable accounts can result in higher tax liability as the income, which comes from interest and dividends, is added to your taxable income for the year. Any sales of assets held in a taxable account that are sold for more than the investment price could also result in increased income tax liability. As your tax professional, we can help you implement tax-saving strategies.

Relying On Us For Investment Advice

Choosing someone to help you with your investments is one of the most important investment decisions you will ever make. We have a 360-degree view of your tax and financial picture. We can assess every aspect of your financial situation and develop a detailed strategy to help you pursue your goals. Before you get started, we can discuss what services we will provide you and at what cost. You, on the other hand, can remain focused on your career and family.

Contact us for a complete analysis of your current financial plan of if you have any questions about the basics of investing. If you don’t have a plan in place, we can work with you to create one that meets your needs. Get started by completing the form below.