Explore Investment Options and Your Financial Risk Tolerance

Apr 15, 2019 | Financial Literacy, News

Investments can be a great way to grow your hard-earned money over time. For many people, the idea of investing is both exciting and daunting. In this post, the Native American Financial Services Association (NAFSA) will explore a few basic investment concepts and strategies, as well as the personal factors to consider when making the decision to invest. For a more in-depth look at investment options, check out the investment module in NAFSA’s free Financial Literacy Program.

Two important factors to consider before investing are your personal investment goals and risk tolerance. Each of the three investment strategies below have risks and rewards to consider before moving your money.

 

Bonds

 

  • Essentially a loan to a corporation, city, organization or government
  • Represents a written promise to repay that debt over a certain period of time
  • The investor is usually paid interest on their principal
  • The value of a bond generally rises and falls with market interest rates
  • Bonds are generally considered a lower risk investment option

 

Mutual Funds

 

  • A professionally managed collection of investments
  • Generally stocks and/or bonds
  • The collection is selected by a fund manager
  • Investors can purchase one or many shares of a mutual fund
  • The risk of losing money is spread out over many investments
  • Mutual funds are considered a medium to low-risk investment option

 

Stocks

 

  • Stocks can also be called a share
  • Represents a piece of ownership in a company (or a “share” of the company)
  • Owning stock means the investor owns a piece of the company
  • A person who owns stock is known as a stockholder or shareholder
  • Considered the riskiest of the three listed investment options
  • Within stocks as an investment class, some stocks are considered “safer” than others, although there is always a potential for loss

 

While risk can vary with investment type, it’s important to note that any investment involves a certain level of risk. You are never guaranteed a positive return on your investment, which is why it’s important to consider your risk tolerance and investment goals, as mentioned earlier.

Through the Financial Literacy Program, NAFSA provides financial literacy modules and tools with easy-to-understand information to help people better comprehend their finances and make more informed decisions.

Explore the program today: https://nafsa.everfi-next.net/

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