Fri. Jun 2nd, 2023

Investing – How to Maximize the Return on Your Investment

Whether you’re looking to invest for the long term or need to make some quick money to meet an unexpected expense, there are many options available. The key is to identify your financial goals, risk tolerance and time horizon to determine which investment option will best fit your needs.

Stocks, bonds, certificates of deposit and bank accounts all provide a mix of safety, liquidity and income potential. They may also help you manage your risk and offset the effects of inflation.

It should be able to provide income

If you’re like most people, your income comes from a job or some other source that allows you to cover essentials and save a little money in a safe place. The challenge is to deploy that money in a way that will maximize the return on your investment while also avoiding the risk of burning through it too quickly.

One of the best ways to achieve that goal is by putting your cash to work on the stock market. This type of investing can be a bit risky, but you’ll likely see your investment appreciate over time and make it easier to reach your long-term financial goals. The key is to figure out how much you need to save for your goals and find a strategy that works for you.

The best part of investing in the stock market is that you don’t have to invest a large sum upfront. You can buy small-cap and mid-cap stocks that offer great value for your buck while still giving you the opportunity to reap dividends as companies reward investors with additional income.

A smart way to put your hard-earned cash to work is by following the 50/15/5 rule, which calls for 50% of your take-home pay goes toward essential expenses, 15% into retirement accounts and 5% into savings. It’s also a good idea to diversify your investments, which can help reduce the risks associated with any one type of investment.

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It should be able to increase in value

One of the benefits of investing is that you can earn returns on your money, which means it can increase in value over time. This is because stocks and bonds both pay interest (and, sometimes, dividends) and can grow your wealth.

Stocks are a form of investment that represent ownership in a company, which means you have the opportunity to make money when the price of the stock increases over time. And because you own shares of a company, you have the power to influence its management and decisions that are beneficial for your long-term interests.

But remember, stocks are not indestructible and can lose value during tough economic times. That’s why you should invest in stocks for the long term, and ideally, over many years to decades.

You should also diversify your investments, so that you have exposure to different asset classes and markets. This is essential to help prevent the risk of being too reliant on any one type of asset, like real estate.

Another way to ensure you have enough money for retirement or a rainy day is to start an emergency fund, which consists of cash set aside in a form that is easy to withdraw quickly. This can include funds in a savings account or money market fund that are liquid and FDIC-insured. This is especially important if you are a new investor or are relying on investments to meet short-term goals.

It should be able to provide liquidity

Liquidity is the ability to convert investment assets into cash quickly and without causing a significant loss in value. This is important because it allows you to get money when you need it, whether you’re going on vacation or facing an emergency.

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When it comes to investing, liquidity should be a factor in all your decisions. If you’re not able to sell your investments when you need them, you may find it difficult to meet your financial goals and objectives.

It also can help you manage your risks and diversify your portfolio. The amount of liquidity that you should have in your investments will depend on the level of risk you’re comfortable with and the types of investments that you want to make.

Some assets have higher levels of liquidity than others. These include checking and savings accounts, CDs, bonds, stocks and mutual funds. Other assets can be more illiquid, such as real estate and commodities.

One of the best ways to increase your liquidity is by establishing an emergency fund. This will ensure you have enough cash to cover your basic living expenses – housing, food, gas and other costs – for at least three months to one year.

Investing can be a good way to grow your wealth and increase your purchasing power over time. It can also help you achieve your personal and business goals, such as building a retirement plan or paying off debt. Depending on your financial needs and goals, you might want to consider different types of investments, such as stocks, bonds or real estate. If you aren’t sure which ones to invest in, it might be a good idea to talk to a professional about your options.

It should be able to provide safety

Whether you work as a salaried employee, a business owner or a professional, you probably have some disposable income on your hands. And it’s important to put that money to good use, so you can enjoy a comfortable retirement, meet your financial goals or get out of debt.

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If you’re looking for the safest way to do that, investing in something like a certificate of deposit or money market account makes the most sense. These low-risk options pay higher rates than your average savings account and are often insured by the Federal Deposit Insurance Corporation, which means you’ll be protected if the worst happens.

But there’s more to investing than just paying the highest rate possible. For example, stocks can be a great option for people who are looking for long-term growth and want to take advantage of lower tax rates than you might find in your local savings account. The best stock-investing strategies also require patience and a healthy dose of risk tolerance, so you should consider your specific situation before making a big investment.

Other investment options that might be worth a look include a no-penalty CD, high-yield savings account and the ever-popular Treasury bills. Depending on your needs, you might even want to check out money market funds and Treasury Inflation-Protected Securities. The key is to make sure you can rely on these investments, so you can count on them to make you money in the future. The best way to determine which safe investment will fit your needs is to consult a qualified financial planner.

Jeffrey Augers
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By Jeffrey Augers

Jeffrey Augers is a highly skilled and experienced financial analyst with over 12 years of experience in the finance industry. He has a proven track record of delivering exceptional financial insights and recommendations to clients, empowering them to make informed decisions and achieve their financial goals. Jeffrey holds a Bachelor's degree in Finance from the University of Michigan, and an MBA from the Wharton School of Business.