7 Types Of Investments All Boss Women Should Know About

Savings Account:

Savings accounts are used to store cash while also earning interest on the money deposited into the account. Usually, the interest rate provided by the bank is no more than 2%. When used over the long-term, savings accounts grow your money while also helping you put funds aside for important matters that arise in the future. Experts encourage individuals to save 3-6 months of expenses in a savings account in case of an emergency.

Money Market Accounts:

A money market account is similar to a savings account. However, money market accounts earn more interest and the minimum balance required to be in the account is generally higher. These accounts also come with more cash withdrawal privileges than a typical savings account.

Certificate of Deposit (CD):

CDs are a type of time deposit that pay interest in exchange for allowing the bank to hold your money for a particular term. These terms can range from 6 months to 5 years. During that time, customers are not allowed to withdraw the money from the bank without paying an early withdrawal penalty. Maturity dates mark the end of your CD term, allowing you the option to reinvest in another CD or withdraw your original investment plus the interest you earned during the term of the agreement.

Stocks:

Simply put, stock represents a share of ownership in a public company. Companies sell stock to assist in their endeavors to raise money or grow the business. By investing in the right companies, you can make a long-term profit, which could help generate wealth.

This is especially true when investors commit to reinvesting dividends earned from shares in a method called compounding. However, it is important to note that stocks are riskier than the previous forms of investments mentioned. It is always a good idea to research different types of stocks to have a clear understanding prior to making an investment.

Bonds:

A more short-term investment is through bonds. Buying a bond is a way of lending money to a governmental entity or company. During the set period of time for which the bond is issued, the investor receives steady interest payments. The amount of these payments is based on the agreed interest rate. At the term of the bond, the bond issuer is required to pay back the original loan amount.

Mutual Funds:

Mutual funds are a combination of investments including stocks, bonds, and money market accounts. As an investor in a mutual fund, your financial advisor helps you pool your money with other investors. This process creates investment portfolios. Most portfolios include name brands similar to Apple, Coca-Cola, Ford, and AT&T. This type of investment is a winner for financial wealth and retirement.

401(k):

A 401(k) plan is a retirement plan offered by employers. As an employee, you can choose to have a portion of your check sent to your 401(k). The money contributed to this account is typically invested in mutual funds to earn you more money. A major benefit is that these contributions are made with pretax dollars.

This helps reduce income tax and may make you eligible for certain tax deductions and credits. Another benefit is that in most instances your employer matches a percentage of the money you invest in your 401(k). However, you should check with your company to learn more about how long you must be employed by them to receive the matched portion.

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