Understanding the basics of investing is essential for anyone looking to build wealth and reach their financial goals. It’s important to understand risk and your own risk tolerance so you’re able to create a balanced investment portfolio designed to meet your goals.

Investing basics

Do you think of investing as speculating or gambling — betting on what the market will do or trying to time the market to make a quick profit? Or do you think of investing as a long-term, methodical way to save for the future? Well, it’s a little of each. Investing involves taking a certain amount of risk with the ultimate goal of return — that is, multiplying your money over time.

Investing can help you plan for long-term goals, like retirement. Done properly, investing is a carefully planned and prepared approach to managing your money, and planning your investment strategy is about discipline and patience.

Risk and return

When it comes to investing basics, you need to understand risk — the potential for losses as well as gains. All investing involves taking on some level of risk, so it’s important to understand the relationship between risk and return. Typically, as the potential for higher returns increases, so does the level of risk. Choosing the investment plan that’s right for you depends largely on your level of comfort with risk — your risk tolerance.

To get a better sense of your own risk tolerance, ask yourself these two questions:

• How comfortable are you with risk? This is subjective, and it depends on many factors, including your financial goals, life stage, personality and investment experience. Some investors are comfortable with a higher degree of risk, while others are more risk-averse. Most people fall somewhere in between.
• What is your time horizon? Time can be a powerful ally. The longer you’re going to be invested, the more flexibility your investment plan might have to survive setbacks along the way. Phrased another way, the more time you have, the riskier your asset mix can typically be.

Your answers will help you with the next step: creating a balanced investment portfolio. Learn more about risk.

Creating a balanced investment portfolio

Your comfort with risk and your timeline to retirement should influence the way you invest. Many investors start with a moderate or aggressive growth strategy in their younger working years and gradually shift their asset mix toward safer investments as they near retirement. That’s all part of having a balanced portfolio — adjusting your investments over time to meet your needs. But don’t worry. This process doesn’t have to be hands-on and time-consuming as there are investment options designed to be hands-off. For example, you may have heard of target-date mutual funds. These funds are managed such that the asset allocation will gradually shift from more aggressive to more conservative as the target year approaches, making them great options for investors looking to spend minimal time or effort managing their portfolio.

Because each investor is different, there’s no one-size-fits-all investing plan. That’s why it can be helpful to meet with a financial professional. Financial Advisors can help you customize a financial plan based on your individual needs, risk tolerance, time horizon and financial goals.

Our CFS^* Investment Services team uses two innovative tools to create a financial plan that works for you:

• Riskalyze: This tool will help you gauge and understand your personal risk tolerance so you can make the right investment choices.
• Asset Map: This tool will let you visually organize your financial plan and track your progress along the way.

When you’re ready to take the next step with investing, our team of CFS^* Financial Advisors will be here to help.

Ready to get started? Contact a CFS^* Financial Advisor.

Grow has contracted with CUSO Financial Services, L.P. (CFS) to provide investment services, and your CFS^* Financial Advisor will help you build a plan that meets your needs. The advisor will look at your current spending, saving and investing, learn about your goals and priorities, make objective recommendations and support your efforts moving forward through the implementation and management of your plan.

SCHEDULE A COMPLIMENTARY CONSULTATION

^*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members. For specific tax advice, please consult a qualified tax professional.

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Posted In:

• Investment Education
• Retirement Planning