As a Certified Financial Planner™ professional, I’m often asked by women how investments work, and why they should invest outside of a savings account. Without a clear understanding of why you should invest in a company in an attempt to make a profit rather than putting money in a savings vehicle like a CD, it may be easier to take the path of least resistance. Let me explain. The bank or credit union pays you one quarter of a percent (or less) on your deposit, which is in essence a loan to the bank, and they loan money out to others at 4% to 5%. You may get a bit more on a CD, but that, my friend is capitalism. A savings deposit pays one quarter of a percent (.25%) to the loaner (you); and 4.75% to the owner (the bank). In order to accumulate meaningful savings, it is often necessary to take on some investment risk. So that leads to the question:
How is wealth created?
There are four things required in order for wealth to be created.
1. Financial capital or money. Money is necessary to be invested in order for a company to manufacture a product or provide a service for a profit. 2. Natural resources. Oil, gas, land and gold and other commodities are assets that can be used in creating products. 3. Intellectual capital. A great idea or a new way of delivering a product or service is an example of intellectual capital. Think Apple i-Phone or the Google search engine. 4.Skilled labor
When all four of these things come together, wealth is created. If we provide capital to a company through investment of our money, that entitles us to a piece of the wealth created. Investing, in its simplest form, is saving a part of what you earn, having an investment philosophy or discipline and a road-map, and paying attention to the cost of the investment. If you’re not sure how to proceed, engage a Certified Financial Planner and they will help you make a plan. Don’t wait for your husband or your father or some other man in your life to do this for you. You are capable and qualified to do this on your own.
Note: Due to industry regulations on communication, we are unable to allow for public comments on this blog. Please feel free to email me your questions and/or comments to firstname.lastname@example.org. Thank you. Securities and Investment Advisory Services offered through NFP Securities, Inc., Member FINRA/SIPC. NFP Securities, Inc. is not affiliated with Fish & Associates.