Three Good Reasons to Invest Your Money

Three Good Reasons to Invest Your Money

What is the purpose of your investment account?

When you play a game of chess, you base your strategy and tactics on achieving your ultimate goal… to win. Similarly, when you invest, you should always keep your objectives in mind.

While you may think everyone’s answer to this question is “to make money,” asset growth is not the only purpose of an investment portfolio.

It’s important to clarify your portfolio’s purpose because certain investments are more suitable for achieving a particular goal than other investments. The three most common investment goals are:

A common investment goal for young folks: Growth

Growth investors just want to increase their net worth. Stocks, Exchange Traded Funds (ETFs), and mutual funds normally fit in well to this type of account. Depending on your risk tolerance, you could choose different sectors, more or less diversification, and active or passive management.

A common investment goal for retirees: Income

If your goal is to supplement your salary or pension, dependability is required, and bonds and/or dividend-yielding stocks may be a good option for you. An income-oriented portfolio needs to be less risky than a growth portfolio, since you need the money now, and can’t risk the possibility of losing it in a volatile market. One of the big risks of income portfolios is that they won’t earn enough income to offset inflation. Find out some solutions in the chapter “Protect Your Retirement from Inflation” in The Retirement Planning Book, which you can download for free.

A common investment goal for the generous of heart: Divestment

Are you interested in leaving an inheritance, or would you prefer your offspring to enjoy some of your money while you are still here? Does philanthropy play a role in your investment portfolio? If so, set up your investments and beneficiaries in the most tax-efficient manner.

What are your investment goals?

For help in defining your investment goals listen to this six minute podcast.

Douglas Goldstein is the co-author of Rich As A King: How the Wisdom of Chess Can Make You A Grandmaster of Investing, an avid chess fan, and international investment advisor and Certified Financial Planner (CFP®).