Why Invest and How To Invest

Introduction to Investing

Many people just like you turn to the markets to help buy a home, send children to college, or build a retirement nest egg. But unlike the banking world, where deposits are guaranteed by federal deposit insurance, the value of stocksbonds, and other securities fluctuates with market conditions. No one can guarantee that you’ll make money from your investments, and they may lose value.

The U.S. Securities and Exchange Commission enforces the laws on how investments are offered and sold to you. Protecting investors is an important part of our mission. We cannot tell you what investments to make, but this website provides unbiased information to help you evaluate your choices and protect yourself against fraud.

What kinds of investment products are there?

Stocks

Bonds

Municipal Bonds

Mutual Funds

Exchange-Traded Funds (ETFs)

Annuities

Certificates of Deposit (CDs)

Money Market Funds

Commodities

Hedge Funds

Real Estate Investment Trusts (REITs)

International Investing

How can I avoid investment fraud?

Investment Strategy:

Pay off CC balances quickly.

No investment strategy pays off as well as, or with less risk than, eliminating high interest debt. Most credit cards charge high interest rates — as much as 18% or more – if you don’t pay off your balance in full each month. If you owe money on your credit cards, the wisest thing you can do is pay off the balance in full as quickly as possible. Virtually no investment will give you returns to match an 18% interest rate on your credit card. That’s why you’re better off eliminating all credit card debt before investing. Once you’ve paid off your credit cards, you can budget your money and begin to save and invest.

Here are some tips for avoiding credit card debt:

Put Away the Plastic

  • Don’t use a credit card unless you know you’ll have the money to pay the bill when it arrives.

Know What You Owe

  • It’s easy to forget how much you’ve charged on your credit card. Every time you use a credit card, track how much you have spent and figure out how much you’ll have to pay that month. If you know you won’t be able to pay your balance in full, try to figure out how much you can pay each month and how long it’ll take to pay the balance in full.

Pay Off the Card with the Highest Rate

  • If you’ve got unpaid balances on several credit cards, you should first pay down the card that charges the highest rate. Pay as much as you can toward that debt each month until your balance is once again zero, while still paying the minimum on your other cards. The same advice goes for any other high-interest debt (about 8% or above), which does not offer any tax advantages.

Small Savings Add Up to Big Money

Wait 24 hours before buying anything on impulse.

How much does a daily candy bar cost? Would you believe $465.84? Or more?

If you buy a candy bar every day for $1, it adds up to $365 a year. If you saved that $365 and put it into an investment that earns 5% a year, it would grow to $465.84 by the end of five years, and by the end of 30 years, to $1,577.50. That’s the power of “compounding.”

With compound interest, you earn interest on the money you save and on the interest that money earns. Over time, even a small amount saved can add up to big money.

If you buy on impulse, make a rule that you’ll always wait 24 hours before buying anything. You may lose your desire to buy it after a day. Also, try emptying your pockets at the end of each day and putting spare change aside. You’ll be surprised how quickly those nickels and dimes add up.

Below are some great and useful links from Investor.gov about finances and goals and being “on it” when it comes to finances, credit, investing, and saving.

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