One of the most common foundational values is GROWTH. We, as human beings, strive to always be advancing, succeeding, doing-better-than-before, etc.
Growth is obviously one of the most common money-goals as well. Growing our money while doing as little as possible on our end, is the best way to build wealth. Read below for a few low-to-high risk opportunities for growing your money faster than you can work for it, and see which one sits right with you!
Feeling some emotional push-back? We’ll walk through that too!
Growth, in money or life, involves taking risk. When it comes to evaluating risk, the most important factors are time, and your personal risk tolerance.
Some questions to consider:
When do you actually need this money, and what is it for specifically? If it’s a short-term goal, it’s usually smart to put the money somewhere low-risk. This is because money needs time to grow and compound (interest snowballs into more interest) over time, which could be a year, or decades even, depending on what the money is for. Tip: It’s a good rule of thumb to reconsider investing any money you need back in 7 years or less.
Do you have enough cash on hand to recover if the risk you take fails? What is your cushion and how much can you afford to lose?
What is your personal level of tolerance that allows you to take on risk and still feel relatively stress-free aka sleep at night?
Disclaimer: Not an investing expert, and not investing advise, ever.
Virtually no-risk opportunities:
Certificates of Deposit (CD’s).
Upside: You can access your money at any time (CD’s have a variety of term limits however) and it can grow much faster than in a traditional Savings Account; you know the rate your money will grow. It’s predictable.
Downside: Your money is not growing as quickly as it might if you take on more risk in some of the options below.
Medium-risk opportunities:
Purchasing Real Estate
Upside: Historically the number one way that most individuals build wealth; the value of the home that they purchase and live in increases over time. Traditionally considered a safe investment since we all need to live somewhere and pay for it.
Downside: Large up-front investment of cash on hand, expensive to maintain, etc. Returns are determined by where you live and interest rates available at the time you buy in, if you need to take out a loan. Evaluating time is important here, as these assets can take a longer time to grow. If you had to access your investment quickly, you’d have to physically rearrange your lifestyle if you were living the house.
Investing in the Stock Market: Bonds vs. Individual Stocks vs. ETF’s/Mutual Funds
(Quick Aside: Bonds are typically thought to be the lower risk ((and also lower returns)) of stock market investments wherein you loan money to a city or project and you expect your money will be returned with interest at the end of the term that is specified. Individual Stocks are slices of a company that you own ((example: NIKE)). The value of what you bought the slice for rises and falls based on how that specific company is doing. Exchange-Traded Funds (ETF’s) are a group of Individual Stocks in a sector/industry that you buy all wrapped up as one investment ((example: Footwear including NIKE, Foot Locker, etc.)) so you can diversify and watch your investment rise/fall on how all of those companies do as a whole ((meaning, if NIKE is doing terrible but Foot Locker is doing amazing your shares value out somewhere in the middle)) and Mutual Funds are very similar to ETF’s in that they are groups of common-company types but can be more-costly to manage, but sometimes perform better. End of quick aside.)
Retirement Plans
If you participate in any type of Retirement Savings Plan, you’re already an investor.
Upside: This is the most acceptable option for retirement savings that we currently have, therefore lots and lots of people participate in it and the historical data shows an up-trend in the market over long periods of time. You have the option to somewhat control your amount of risk by the types of investments you take on. These accounts are typically tax-advantaged and can help you grow your money faster without as many fees as traditional investing.
Downside: Rise and falls in the markets can feel like a roller-coaster ride if you’re looking everyday–don’t do this! Takes some active management, especially as you get closer to the timing of needing your retirement funds because when you’re closer to cashing out, it’s believed it’s best to take on less risk.
Brokerage Accounts (Traditional Investing)
Upside: Again, traditionally tracked, the market tends to move upwards over long periods of time. Because of compounding, can grow your money much faster than just a Savings Account, if you (or someone who advises you) picks products that do well.
Downside: Fees, potential taxation, can take some self-education or paying someone to manage for you, and requires a tolerance for risk.
High-risk opportunities:
Digital Assets: Cryptocurrency
Upside: New emerging “anything” allow investors to get in early, which can pay off if the thing does well. Lots of hype around something new can drive the price up.
Downside: There is no historical data we can point over long periods of time (meaning 30yrs+) so it’s anyone’s guess how this class of investments will play out long term. The swings in the just the early years up until today have been quite wild. The accepted expert-advice out there right now among Cryptocurrency investments is to use a very small percentage of your overall portfolio (entire investments) and accept that this is high risk. In other words, don’t play with any money that you can’t afford to lose.
Money Mindset
As you read thru these types, feel in your body which peaks your interest, and also which congers up immediate thoughts about why that one wouldn’t be right for you. Some common reasons we avoid risk with our money are the messages we received about money growing up and also falling victim to perfectionism or worrying we’re “doing it wrong” so we don’t do it at all.
If any of this sounds familiar to you, take a moment to dig a little deeper and see what comes up. Can you unravel a risk-avoidance thought to its inception point and see if that belief still serves you today? For example, “I don’t know enough about X so I’ll never be able to contribute there” may be holding you back from all kinds of amazing financial growth. That thought may have kept you safe in the past, but how does that it serve you today, and what is the cost?
Taking no risk is a choice and has it’s own consequences. What might you be missing out on? How might you use your ambivalence and caution wisely to move towards risk? What do calculated risks look like to you?
As Jen Sincero, author of “You are a Badass at Making Money” explains, “You can use fear as your compass. It’s the same energy surge of excitement. Fear and excitement are two sides of the same coin. And that’s exactly what you should be experiencing is a feeling of excitement combined with fear..that’s where growth happens.”
What’s one step you can take today towards something you find both exciting and scary?
Unlocking Abundance 