When it comes to your retirement, you must know that it is your responsibility. There are people who believe that social security is all that they need in order to retire, but the truth is that social security will only give you a small portion of what you will need to retire. Apart from that, Social Security may not even be around by time you retire. Apart from that fact, it is good to know that saving for retirement is actually not that difficult and you do not have to break the bank in order to get the money that you need for your retirement. All that you have to do is plan well and invest in good investments. The following is a list of four things that a newbie needs to know about investing.
1. The general idea of investing
When people think of investing, they generally think of trading. They might have a busy stock exchange floor in their minds. That is actually not investing, that is trading. Trading is buying individual stocks and selling them in order to make a quick return. When you invest, you put your money somewhere that it can grow for a long time; in that way, you can get all the money with its accumulated interest and use that for your income once you have retired. Stocks are shares of a company. Savvy investors who know about the ups and downs of the market might invest into stocks. Bonds are basically loans that you give to a financial institution, generally a bank. These institutions use your money and they agree to pay you back; generally, you get the money back with interest. A mutual fund is a group of stocks that are together in one package.
2. 401ks and IRAs
401Ks and IRAs are investment vehicles that are used to hold and invest your money. 401ks are generally offered at your place of employment. Your job may allow you to choose the stocks, bonds or mutual funds that you will want to invest in, or they may just offer you a general package. IRAs are Individual Retirement Accounts; the most common IRAs are Roth and Traditional. These are accounts that you set up yourself through a bank or a financial institution. When you set up a retirement account, you can go into the IRA and find the type of investments that you want to make through this vehicle. IRAs offer great tax advantages.
3. What is a gold backed IRA
A gold backed IRA offers the same retirement benefits of a regular IRA. A gold IRA has this precious metal as its stronghold instead of currency. Currency is what is backing traditional or Roth IRAs. Since the value of the dollar goes up and down with the economy, savvy investors invest in gold backed IRAs. Generally, precious metals tend to go up in value when the market is volatile. Gold is not the only option when it comes to investing in IRAs, you can also get an IRA that is backed by silver or platinum as well.
4. Just start investing
Even if you feel like you do not know all that there is to know about investing. The key is to start young. Investing is all about accumulating compound interest, and the sooner you start to invest, the more money that you will have when you retire. If you have an employer, get a 401k and contribute the maximum amount. If you are self employed, get an IRA. Those are the basic investment vehicles that you need to get started. As time goes on, you can read and choose to invest in other ways as well, but for now, just get started.