The 4 Most Common Investment Vehicles Financial Advisors Use

The 4 Most Common Investment Vehicles Financial Advisors Use

Foreign thanks again for joining this week’s video is going to be uh part three in our very basic overview of investing series specifically today’s video is going to be how to invest but for today we’re just going to focus on the the very general broad question of how to invest so um the first thing to start with is to understand there’s many many types of

Investments what i’ll be speaking about today and broadly in general is a very small range of a whole wide universe of types of investments on this slide you can see you have stocks bonds certificates of deposits cryptocurrencies retirement plans there’s a whole bunch of stuff on here real estate’s not included on here but you could include that private placements

Uh limited partnerships so there’s there’s a huge wide universe of investments my opinion is that the universe is too broad and too wide and paralyzes people in into inactivity and so we really want to do is find what are the right types of things to focus on learning about for us in our unique position for most people below a certain net worth we want to focus on

A much narrower range of investments but even within that at different phases in the journey into accumulating that net worth we’re going to want to focus on a much smaller range of in investments think of it like taking bite-sized pieces of this puzzle and then growing your education and your knowledge over time so that you can add more investment tools into the

Arsenal so today i’m going to talk about a few specific types so the broad question of how to invest begins with understanding what you’re beginning to invest in for most people we’ll be investing through our employer-sponsored retirement plan or through our own individual brokerage or trading accounts those have the lowest barrier to entry in terms of the amount

Of cash you need to invest in order to get access to investment markets they’re also highly liquid so you can get your money in and out pretty easily and they’re not complex to actually manage or use so to begin specifically talk about individual securities which are stocks and bonds these are the investments that you might commonly associate with things like

The new york stock exchange or the stock market or the s p 500 within those bigger buckets titled the stock market or the stock exchange or the s p 500 you have companies that sell a percentage of their uh equity or their their ownership to the general public these are super super micro small amounts in the form of a stock or if you’re a government like the us

Government or california state government or a municipal government you sell bonds which are ious or debt and these are traded in um easy manner and through the stock exchange or through different brokerage accounts and so the highlight here is it’s very easy to do it’s highly liquid and easy to get access to these investments but the challenge is that it’s hard

To do well to start thinking about what do i buy which stocks which companies or which bonds which states which which governments what do i pay what what is a marketable price for that how do i know if i don’t pay attention all the time how do i know what the right price to pay is when do i buy like when is it the right time to buy now tomorrow a week from now a

Year from now a week a year ago when do i sell and then how do i diversify i don’t want to put all my eggs in one basket diversifying is the process of investing into a series or a range of different stocks or bonds so that if one company or one government performs poorly all your money doesn’t go down the tube all right the second type of investment we’ll cover

Today is mutual funds again very broad level we’ll do a deeper dive on these in the future mutual funds are um they are pooled investor money so what that means is um there’s a person a professional investment manager who starts a business that does in professional investing he goes out and selects companies and bonds or he or she goes out and selects companies

Or bonds and buys a portfolio of these things and then you or i who are not experts in investments can then go and say hey i’m going to place a bet or invest in this manager i’m going to put my trust in this manager and say he or she knows better than i what to invest in so i’m going to invest in this manager’s company i’m going to buy ownership in this fund and

That funds performance will mimic or track the performance of what this man or woman invests in so many different investors that are less educated or less informed can benefit from kind of um attaching themselves to this professional investor and usually this professional investor will have a company called a mutual fund and they’ll have a stated invest objective

It’ll be composed of many different stocks and bonds among other things that diversifies the risk and it has usually has a fee associated with it either a front-end sales fee or some kind of ongoing fee or some kind of combination of both and the hope is that the trade-off of paying the fee for a professional full-time investment manager um will actually produce

Reward that will be better than what you could do or i could do on our own it’s easy to get access to these they’re traded in brokerage accounts we’ll go through that again later day very briefly later um but this is a very common way to invest that takes the onus off of uri as individuals finally we have what are called exchange traded funds and these perform

Exactly or very very similarly to mutual funds um they’re traded like stocks meaning you can buy a portion of this funds company but that fund company has its own portfolio of stuff that it buys the fund company’s value or performance mimics the portfolio that it invests in and these are passively managed instead of actively managed so different from a mutual

Fund in that the mutual fund is an active manager full-time focusing on trading the individual investments within that mutual fund to try to get performance for their investors etfs are passively managed they don’t have that full-time person who does it the investment objectives are similar to mutual funds in that they try to diversify across many companies they’re

Trying to facilitate individuals like you or i being able to invest in a broader portfolio when we might not a have the expertise or b have the money to buy 200 different companies and the benefit of an etf is that the fees are much much much lower than mutual funds now there are some trade-offs in in terms of what you get out to which they’re a good tool and again

I’ll go into a deeper dive into each of these things at a future date so we can go through the pros and cons of them last but not least all of this takes place so once you once you’re evaluating the types of investments now you have to think about what where do i do the investing and this is done with this within specific account types so this is just a quick slide

With four examples you have brokerage accounts which is a certain type of brokerage account refers to the taxation of that account and again it won’t go into detail to that but examples might be robin hood or wealthfront or charles schwab account or a td ameritrade account then you have employer retirement accounts that’s your employer’s retirement plan within which

You make contributions and then the investments take place in there and those might be 401ks or 403bs 457s and the thing to notice here is or to note here is that employer retirement all these different types of accounts that i go through now will have different types of investments available within them a broader or narrower range or volume of investment vehicles

Um then you have individual retirement accounts like an ira or a roth ira there are many different types of iras as well and then you have self-employed retirement accounts like a sep ira or a solo 401k and the thing here is once you’re not your job is not done once you just start to learn about the types of investments now you also have to learn about where those

Investments take place what are the tax implications why is one account better than another am i limited to using certain types of accounts should i not overlap types of accounts and you’ll see in future videos when i do deeper dive that these factors actually matter and come into play and so um to wrap up here the summary is this is a good place to start but and if

You haven’t seen the other videos i’ve made on investing you should each of them are about 10 minutes there’s one called four things to consider before you invest your money stop rushing to invest the second one is the what where and why of investing and then this one is how to invest and you can see that the picture is not simple and it will require some time and

Effort uh if you ever read the book the millionaire next door that’s a common thread people who achieve millionaire net worth status typically have invested a lot of time and attention into learning about investments because they want to understand even if they delegate those activities to a professional they want to understand what they’re participating in anyways

Hope this was helpful again inviting you to submit comments or suggestions on future videos if you like the trend please leave a comment and a like on this video on youtube because it helps it helps other people find my videos and it also tells me if you like the the topics i’ve chosen chosen that i can keep pursuing these topics and adding more depth to it thank you so much foreign

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The 4 Most Common Investment Vehicles Financial Advisors Use By Peak Financial Planning