Investing for Your Future

"Investing simply means allowing individuals, businesses, and governments to borrow your money in return for a fee, or interest" (Keown, 2007, p. 17). You may ask yourself, why is investing so important? Countless Americans live their lives day to day without once investing their money. They each have their own unique explanations and/or excuses why they do not choose to invest. Some may feel that they do not have enough money to start investing. Or others might believe that investing is such a complicated process that it is not worth their time. Perhaps some of them even insist that investing is not for them-i.e., "investing is only for those who are rich or are into business," "I'm too young (or old) to start investing," or "investing is too risky; I'm not willing to lose all of my money." So, why should I consider investing?

Preparing for the Unexpected

First of all, investing helps people prepare for unexpected emergencies and hardships in the future (Keown, 2007). I have plenty of personal experience of how being ill prepared for the future can ravage a family. For example, my father worked hard since he was about fourteen years old. He had his ups and downs, but he brought in steady money, so he was able to provide fairly well for himself and his family most of his life. However, investing and saving for the future was never a priority of his. In the end, my father never even saved money for his own retirement. Unfortunately, he became permanently disabled in 2001 and has not been able to work ever since. Because he never saved or invested any money for his future, he is now stuck living on Social Security Disability benefits, which does not even pay for everything he needs each month the majority of the time. In the end, this has caused me to realize how important it is for every person to learn the basics of investing.

Reaching Your Personal Goals

Also, investing allows you to accomplish many of your goals in life (Keown, 2007). Whether you want to own your own home, buy a new car, or even go on an extended vacation to Europe, investing is a valuable tool. Overall, investing allows you to make your money work for you, so you can make more money to reach more of your goals in a shorter amount of time (MetLife Consumer Education Center, 2008). Consequently, the earlier you begin saving and investing your money, the more money you can make and the easier it will be to finance the more challenging of your dreams, such as buying your own home or saving for your children's future college expenses (Keown, 2007, p. 352).

Lending vs. Ownership Investments

It is also important to realize that investing comes in various forms. Investments can be broken down into two basic types: (1) lending investments and (2) ownership investments. Lending investments encompass all invested money that represents a loan to an entity. Some of the most common examples of lending investments include savings accounts and bonds. A lending investment represents a promise from the entity to repay the original amount, as well as any agreed upon interest or fixed amount. On the other hand, ownership investments are any investments that purchase actual assets that are owned by the investor, such as real estate or stocks. Any extra money earned by ownership investments are usually in the form of profits and/or dividends (Keown, 2007, p. 354).

Investments for Short-term & Long-term Goals

Investment options can also be divided by their purpose. For example, savings accounts and insured market-rate accounts (IMRAs) are ideal for short-term goals since you can take out your money with comparatively few restrictions but still earn interest on your money. Then, for goals more in the future, you might choose to invest in Certificates of Deposit (CDs), which earn even more interest for a set period of time, or U.S. Savings Bonds, which continue to earn interest until their mature date (University of Maryland University College, 2007).

Investments for Specific Goals

Finally, there are investments that are made for more specific reasons. A good example of such investments are investments for your retirement. Retirement investment options are often made available through a person's employer, such as 401(k) plans or 403(b) plans. Also, for those who are self-employed, Keogh plans are available so they may save up to a specified amount of their income without being taxed. And for those who qualify, the federal government allows people to invest in Individual Retirement Accounts (IRAs) up to a certain amount and be tax exempt (MetLife Consumer Education Center, 2008).

Additional Information About Investing

In conclusion, I encourage you to find out more about investing and what investments might be right for you. Here are five websites that offer valuable information about selecting, calculating, and monitoring the investments necessary to reach your financial goals and to prepare yourself and your family for the unexpected.

U.S. Securities and Exchange Commission-Calculators for Investors: http://www.sec.gov/investor/tools.shtml

The U.S. Securities and Exchange Commission (SEC) provides links to ten helpful tools for investors: (1) Mutual Fund Cost Calculator, (2) Tax-Free vs. Taxable Yield Comparison Calculator, (3) College Savings Calculator, (4) Loan Calculator, (5) Savings Calculator, (6) Mutual Fund Breakpoint Search Tool, (7) Social Security Retirement Planner, (8) Ballpark Estimate Retirement Calculator, (9) 529 College Savings Plan Expense Calculator, and (10) Investor Quiz: Test Your Money Smarts. These links are extremely valuable tools for those who are new to investing and/or who are looking to calculate the amounts they should invest for important financial goals, such as retirement or their children's college education.

Investopedia.com-Your Source For Investing Education: http://www.investopedia.com/

Investopedia.com offers an array of information for researching and comparing different investment options. From those just starting to invest to those wishing to expand and/or update their current investment portfolio, this web site offers articles, an investment dictionary, investment tutorials (for beginners, experienced investors, active traders, and those interested in retirement planning), a stock simulator to help predict the future of stock investments, and a stock community for members to communicate with other stock owners about their investments.

Investors.com-Online Edition of Investor's Business Daily: http://www.investors.com/

Investors.com is a web site that is geared toward investors old and new. It supplies a well of investing information divided into four sections: (1) News & Analysis, (2) IBD Stock Lists, (3) How to Invest, and (4) IBD Store. Most notably, Investors.com operates an entire part of its web site (under News & Analysis) for the analysis and monitoring of various investment options. Also, this site boasts its own financial dictionary and offers workshops (for a fee) for different levels of investors to acquire the training needed to make sound investments.

MSN Money-Investing:http://moneycentral.msn.com/investor/home.asp

MSN Money contains an entire section dedicated to informing investors. This site provides everything from a Beginner's Guide to Investing to education and news articles about various investment options to a Quote Watchlist (to track stock interests). MSN Money also offers software to track your investments: Portfolio Manager Essentials and Investment Toolbox.

Yahoo! Finance:http://finance.yahoo.com/

My personal favorite is Yahoo! Finance. I have used this web site in the past to help me with some of my own personal finance interests since it offers information and helpful tips for various decisions, including budgeting, selecting loans, and choosing a car to fit your needs. Yahoo! Finance also provides an entire section for investing, which includes up-to-date information about the stock market, an Options Analysis Tool to help you decide which investments are best for you, and financial information for just about every industry imaginable.

References:

Keown, A. J. (2007). Personal finance (4^th ed.). Upper Saddle River, NJ: Pearson Prentice Hall.

MetLife Consumer Education Center. (2008). Investing for the first time. Retrieved June 16, 2008, from http://www.metlife2000.org/Applications/Corporate/WPS/CDA/PageGenerator/0,4773,P2005,00.html

University of Maryland University College (UMUC). (2007). Types of investments for the short- to medium term. Retrieved June 16, 2008, from http://militaryfinance.umuc.edu/investing/inv_types.html