Being in adulthood for the short amount of time as I have, I am finding myself sadly, not baffled by all the things my younger peers don’t know how to do. The list of how to do basic things from laundry how-to and changing a car tire is ever growing so much so that I am starting to question humanity’s ability to care for itself.
Will we one day be run by machines, thus removing the need to learn all the essential things like how to fold a fitted sheet?
One thing I have found increasingly necessary is to have a primary knowledge of the bare-bones, basics of investing.
Now investing has been something I have participated since my parents were teaching us how to budget at the delicate age of twelve, so I am aware that not all younger millennial had the upbringing I did. Due to that, I am going to break down several investing options that are available to you as soon as you start earning any type of a fiscal living. Even if you choose not to participate, it always helps to have a small talk repertoire of finance jargon to get you through the evening.
There are several types of investment terms that you should be in your knowledge bank.
A stock is a represented share of a company that allows you to profit or suffer the fate of the company you hold it in. There are different types of stocks such as common stock, preferred stocks, and blue-chip stocks; however, these represent levels of treatment your funds will receive based on the market. You can withdraw from your shares from the moment of being sold.
You may be more familiar with this term as our grandparents were fond of this type of investment. A bond, in simple terms, is just a fancy loan. When you purchase one of these, you agree to pay a certain amount to a company or a government entity. There are several categories of bonds, but we won’t go into those at the beginner stage.
This investing should involve land or buildings, making it more of a tangible purchase, unlike the first two. Owning real estate has been popular since the Old West days when the amount of property owned increased your importance. It has only grown in popularity since then due to the variations of income you could receive from these if done correctly.
Moving on to investment structures, we will start with mutual funds. These are a common type of investing that often is low yield but also low risk. These types of investments are mostly a portfolio with a certain amount of stocks from different corporations pooled. Investing like this is supposed to offer more protection from the volatility of the market. A mutual fund can be added to monthly, yearly, or just once when opening. The idea of a mutual fund is to provide a more “autopilot” funding experience. A mutual fund can be withdrawn from at any given time usually unless there are close-ended funds in the portfolio, which means there will be an agreed-upon date that these mature and can then be cashed out.
As you make your way into adulthood with a job that offers benefits, you may find yourself with a 401(k) option. There are even companies that match the amount you contribute to your account. Many companies offer this as an opportunity to invest in your retirement, and the idea is that the more you add, the more you can access when you retire or meet the age of 59 or older. If you access these funds before the accounted time, there will be a penalty you could incur.
Another investment strategy you may have heard of is a ROTH IRA or a traditional IRA. These are similar to the 401(k) except with more restrictions. These will be post-tax dollars that if managed correctly, you will not have to pay taxes on later on when you decided to withdraw from it.
There are countless more types of retirement accounts, but those will be the most familiar to you right now.
So now I charge you, younger millennials, with this. Go forth and be confident in your knowledge of fundamental investing. And if not, there are several books on the subject of how not to be clueless.