Sunshine and Savings: How Stocks & Bonds Can Brighten Your Finances

Saving money for retirement is just the beginning. Investing to make your money grow is the key to a brighter future. At 210 Financial we believe that a well-balanced investment portfolio can help you achieve just that. As you enjoy the sunny days, let’s explore how these investments can brighten your financial future.

Investing 101:

1. What should I invest in? Some of your options for investing include stocks, bonds, mutual funds, index funds, and exchange-traded funds (ETFs). Each has its own risk and return profile, and is suitable for different investment strategies.
2. How much money do you need to start investing? Not a lot. It’s better to start small and add more later, thanks to compound interest (discussed later in the article).
3. What’s the secret to making money investing? Time and staying invested. Having a good temperament is also a key to investment success. Check out Nasdaq’s article “The 1 Key to Investing Sucess, According to Warren Buffet” for more insights.

Risk:

How to know how much risk you should have in your investment portfolio. First, let’s look at what the risk is when discussing finances. Risk when we often use the Rule of 100. The formula looks something like this:

100 – Current Age = Percentage of Higher-Risk Investment Allocations

The result is the percentage of higher-risk investments you could consider having in your portfolio. Another way to look at these is by using the 210 colors of money theory emphasized in Phil Cooper’s book  210 Retirement Blueprint: Finding Your 210 Life. It places associations of colors with different types of investments to help you understand the risk associated with each one.

• Red = Growth: Stocks, Equities, Exchange –traded funds, Mutual Funds, Corporate bonds, Read estate Investment trusts, Speculations, Alternative investments.
• Yellow = Liquidity: Cash, Money Market Accounts
• Blue = Protection: Certificates of deposits, Government-based bonds, life insurance, and annuities.

Market Volatility:

Market volatility, according to Investopedia, means “A statistical measure of the dispersion of returns for a given security or market index.” Ok, What? In simplified terms, it means the higher the reward the riskier the security. Volatility is risk and the uncertainty that comes with investing rather than having liquidity (yellow) or protection (blue).

You might be asking yourself isn’t it better to have money in the bank with no risk? Yes, ideally, that would be amazing if it wasn’t for inflation. Over time inflation erodes the purchasing power of cash, meaning the money you have saved in the bank cannot buy you as much as it once did. Check out this inflation calculator that shows you what inflation does to cash over time.

Compound interest is another factor to help you better understand market volatility. Compound interest is that all you need is a starter amount of money to see it accumulate. One way to plan for market volatility is to have a retirement income plan, which enables you to set aside dollars unimpacted by the market.

Creating a Diverse Portfolio:

You may have heard you need a diverse financial portfolio but, what does that mean? Investments have no “perfect” product, so you must create a well-balanced and diversified portfolio. Here are some diversification strategies to consider. Don’t just have a combination of stocks to bonds or just stocks that don’t diversify your portfolio enough. Index funds boost your portfolio and add exposure to certain sectors.

Cash is also an important one because it’s not risky. Though having a diverse portfolio is good, having too much or having overlapping investments isn’t a good thing, so just be careful and be sure to consult your financial planner.

Conclusion:

Sunny days are ahead with the immense opportunities that investing has on your retirement dreams. For more information, check out this nerdwallet.com article on the basics of investing. 210 Financial is here to help all knowledge levels when it comes to investing or retirement planning see how we may be able to help you, achieve a sunnier financial future.

---

210 Wealth Management, Inc., d/b/a 210 Financial, is a federally registered investment adviser under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. 210 Financial, Form ADV Part 2A & CRS can be obtained by visiting: https://adviserinfo.sec.gov and search for our firm name. Insurance products are offered through 210 Financial, Inc. d/b/a 210 Financial.