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Investing basics for beginners: Investing 101 Why is investing important? ● 1
Investing is an important part of financial well-being.
● It’s how most people plan and pay for major milestones - by investing 2 with specific goals in mind, like education expenses, buying a home, transitioning to retirement and other big achievements and transitions. ● Investing works, making big-ticket expenses possible, because the money 3 you’ve invested grows and earns more than funds kept in most savings accounts.
What is a portfolio? ● 1
Investments are typically bundled together in what’s called a “portfolio.”
● That’s a fancy Wall Street metaphor for the investments you've chosen, as 2 if you kept all your investments in a notebook or portfolio folder. ● You’ll review the investments in your portfolio both individually and 3 collectively, to make sure each one is working as expected and together they’re performing to meet your goals, growing at their expected pace.
What is a mutual fund? 1●
The most common start point for beginner investors is a mutual fund.
2● A mutual fund is a portfolio of investments that pools your money with other investors to purchase a selection of stocks, bonds and other securities. 3 ● Among investment options, mutual funds are the most widely used. 4 ● Mutual funds are ideal if you're investing for a retirement plan, because they're built to minimize fluctuations in earnings and grow more over 5 the long term. ●
A common type of mutual fund is an index fund, also known as ETFs (or "exchange-traded funds").
What is risk tolerance? 1● Risk tolerance is your willingness to endure big swings in the market. 2● It's your appetite for risk - how much are you willing to potentially lose in order to potentially earn more? 3●
For example, some index funds are riskier than others, requiring a high tolerance.
4 ● How much can you afford to lose without it impacting your financial security 5 ? ●
Which means you’re at risk of losing some or all of the money you’ve invested, depending on how the investment’s value moves.
What is risk tolerance? ● There are both upsides and downsides to risk. The more risk you’re willing to take, the more you’re likely to earn more - and the more you could lose, depending on the investment’s performance. ● As you start to invest - on your own or with an advisor, or even if you’ve already started - take time to measure your tolerance for risk.
What is diversification? 1● One of the best ways to boost your risk tolerance - and the potential to earn more - is to diversify your investments, keep a balanced mix of potential high-risk high earners and more reliable, low-risk investments. 2● Asset allocation is how you find the right balance - ensuring your money is distributed between different types of investments with different types of risk. 3 ● A simple way to explain it: “don’t put all your eggs in one basket.” 4 ● With an investment portfolio, that means ensuring your money is invested in different tools, across different sectors and parts of the economy.
What are other common investments? 1● Securities, commodities, futures and annuities are other common investments that are often considered low-risk. 2● Real estate can be part of your portfolio too - another of the asset classes considered stable. Buying a home can help balance the volatility of your investment choices.
How does Bright do investments? 1● Professional brokers and self-guided tools like Robinhood and Stash can help keep your portfolio on track. 2●
Bright offers a third way: a new patented system built to deliver highly personalized financial services.
3● With a Bright Plan, your investments are tailored to you and your goals, and they’re managed with insight powered by data science, a uniquely responsive, high-performance way to invest. 4● Bright learns about finances and your goals, then builds and manages a portfolio tailored to you.
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