As much as I enjoy the warm weather and all the amazing activities that come with it, there is one aspect of my life that inevitably suffers: my wallet. So how do we get to enjoy that unicorn pool float while also staying financially afloat?
Often times, we hear the conventional wisdom of investing in the stock market as a great way to get your money to grow (and it definitely is). However, it can be difficult to find the time to research what type of investment strategy is right for you. The good news is that there are ways to grow your money without wishing you personally knew Warren Buffett. Below are three simple ways to put your money to work.
High Yield Savings Account
A high yield savings account is one of the simplest methods on this list because it is similar to something you are most likely already doing! A high yield account acts just like your traditional savings account that you might currently have with your bank. The main difference is that you’ll receive a higher interest rate. Currently, at traditional banks like Bank of America or Chase, the interest rate that is offered is about .07%, while a high yield account offers about 1.75%.
High yield savings accounts are usually found through online banking opportunities from companies such as American Express or Marcus (a Goldman Sachs offering). These companies are able to offer higher rates because they don’t have the cost of maintaining storefronts like traditional banks do.
If you’re wary about putting your money in something other than a traditional brick-and-mortar bank, do not fear. Just make sure whatever account you’re looking to switch into is FDIC insured, just like your bank.
A Certificate of Deposit is a similar vehicle to the high yield savings account. CDs are available through your local bank and it is an opportunity to grow your savings at a higher interest rate than a traditional savings account. A CD is considered a time deposit, which means you agree to let the bank hold your money for a certain amount of time for a specified return.
Generally the rate is determined by the period and longer terms tend to offer higher rates. However, there is a catch. Should you want to withdraw your money before the CD’s expiration, you will have to pay a penalty. So make sure the money you’re putting in the CD is money you plan on not needing during the lifetime of the CD.
If you’re looking for something riskier but with minimal time invested in research, then mutual funds are a great solution. A mutual fund is an investment instrument that is managed by professional managers. A fund can invest in a variety of securities, such as stocks and bonds. The managers attempt to produce gains and income for the firm’s investors (meaning us!).
A fund usually holds hundreds of different securities, which enables investors to effectively diversify and offset risks. For example, you can take $1,000 and buy a share of Amazon, or buy shares of a mutual fund. If you decide to go the Amazon route, then all of your money depends on the performance of that one company. If Amazon doesn’t sell as many Alexas as they forecasted on Prime Day, then there stands the chance that the stock price of Amazon goes down.
On the other hand, if you put your money with a fund that happens to own Amazon, there are other company stocks in the fund to balance out any losses that Amazon might have incurred. Even though a mutual fund is considered to be relatively low risk, it is the riskiest investment tool on this list. Unlike CDs and high yield savings account, your investment is not FDIC insured. Naturally there are tons of mutual funds out there and a great place to start is to find a fund that mirrors the S&P index.
The S&P 500 index is a compilation of 500 large companies that are publicly listed. The S&P is generally regarded as an indicator of the stock market and a fund that mimics the index is a quick and easy way to get your feet wet. If a fund is the route you are interested in, many brokerages, such as TD Ameritrade and Merrill Lynch, offer the ability to invest in mutual funds at no fee and with great resources to learn more.
Investing your money can be daunting but starting off small in a low risk environment is an effective way to begin. Use these strategies to grow your resources creatively – and get more vacations along the way!