A lack of investing knowledge or exposure to a negative investing situation can often lead people to sit on the sidelines when it comes to growing their wealth. Unsettling market fluctuations, confusing fees, and associated capital gains taxes can leave everyday investors feeling overwhelmed and hesitant. 

Investing in stocks, bonds, and mutual funds can be a great way to reach your financial goals, but only when you have a clear understanding and plan for why and how you’re investing your money.

We want to ensure you feel empowered, encouraged, and educated. And that includes knowing how investing can help you reach your financial goals, the basics of investing, and what bonds, stocks, and mutual funds are.



Utilizing Investing to Reach Your Financial Goals

The main goal of investing is to help you accelerate and achieve your financial goals. Investing in and of itself can be a risky endeavor, with no guarantees. However, with some knowledge and proper planning, investing can help you: 

  • Grow your wealth. You only have so many hours in the day that you can (and want to) work. Investing helps you grow your wealth by allowing you to earn money from your money (not your time). Most investments can be set up quickly and require little maintenance. 
  • Plan for retirement. In your younger years, you can take on riskier investments with higher chances of return and slowly shift your strategy to take on less risk and more stability as you get closer to retirement age. Investing helps you grow your nest egg more than simply saving. 
  • Hedge against inflation. Inflation is inevitable. Because you can’t avoid it entirely, you need an investment strategy that will help protect you against it. Investing in certain assets, such as gold, real estate, and certain stocks, can help you receive higher returns than stockpiled cash (which actually loses purchasing power over time, thanks to inflation). 
  • Create multiple streams of income. Investment income from capital gains, dividends, rent, annuities, interest, etc. can all supplement your day job and any other side hustles you may have, creating multiple income streams in your portfolio. 
  • Leave a financial legacy for the next generation. Investing opens you up to the possibility of creating generational wealth that can last long after you’ve passed. Investing—and teaching your children and grandchildren to invest—can leave a financial legacy you can be proud of. 


These are just a few of the powerful benefits of investing to reach your financial goals. Your specific goals and financial circumstances should dictate what investments you choose. A financial advisor can help you analyze your goals and advise you on particular investments for your portfolio while helping you avoid common investing pitfalls

Investing Basics

Getting started with your investing journey can feel overwhelming, but like any endeavor in life, it just takes some learning and experience. Some major investing concepts include: 

  • Risk tolerance: Your risk tolerance is highly individualized and influenced by your investing goals, time horizon, age, and disposable income. Younger investors or those with large portfolios are typically more aggressive with their investments, while those nearing retirement age may be more conservative. A financial advisor can help you create a robust investment portfolio that comprises varying levels of risk. 
  • Diversification. Investing in diversified asset classes can typically reduce your level of risk because assets perform differently in varying economic conditions. A variety of assets can reduce your portfolio’s volatility. 
  • Long-term perspective. Most investments will require large amounts of time and patience, especially if you’re investing in stocks. The market can go through large swings and it’s easy to get caught up in the latest news headlines. Keeping your emotions in check, sticking to your financial plan, and maintaining a long-term perspective is crucial. 


With these investing basics in mind, let’s explore three popular types of investments. 


Stocks, Bonds, and Mutual Funds

Understanding the nuances of these three popular investments can help you make informed decisions regarding your portfolio. 


Stocks, also known as equities, allow everyday investors to own a small portion of a publicly traded company in the form of shares. Investors can buy these shares through the stock market, a financial marketplace. 

As a whole, start market returns have been approximately 10% over the past one hundred years—with some years returning much lower and others, much higher. This makes it a popular option for investors with a long time horizon because they can ride out market volatility. 

Stock prices are subject to a variety of factors such as overall market conditions, a company’s performance, and changes in varying industries. 

Some companies will pay regular dividends to their investors in the form of cash or more shares. These dividend stocks are often offered by well-established companies but don’t typically appreciate as quickly. Growth stocks, on the other hand, rarely provide dividends but instead have the potential for a greater overall return. 

Determining how much exposure you want your portfolio to have to stocks and more specifically, dividend and growth stocks depends on your overall investment goals. 



While stocks are typically considered riskier investments because of market volatility, bonds are at the other end of the spectrum and considered less risky, especially for shorter-term investing. 

A bond is like an IOU. You lend a borrower a particular amount of money and they repay you in the form of dividends and interest (providing you with fixed income), as well as your initial principal after a determined period. 

There are many different types of bonds to choose from that carry varying degrees of risk and rewards. Treasury bonds are backed by the United States government and are considered to be a very safe investment. You can also choose to invest in bonds from companies outside of your home country (international bonds). Bonds from local communities (municipal bonds) are also an option. 

Though considered a relatively safe investment, bonds are still subject to varying levels of volatility and liquidity, interest rates, exchange rate fluctuations, and other factors. Before investing in a bond, be sure to check out the borrower’s credit rating—this can help prove their trustworthiness. 


Mutual Funds

Instead of cherry-picking certain stocks, bonds, and other assets to invest in, you can buy shares in mutual funds. These investment vehicles are professionally managed and comprised of pooled money from multiple investors that invest in a variety of securities (stocks and bonds being a few of them). As an investor, you take part ownership of the mutual fund through your share purchases. 

Mutual funds are a common investment because investors typically pay fewer fees than they would on their own, they can conveniently and quickly diversify their portfolio, they maintain a high level of liquidity, and their investments are professionally managed by the fund’s manager. 

There are numerous types of mutual funds to choose from, here are a few common ones:

  • Index funds seek to mimic the returns of a market index, such as the S&P 500 Index, and are passively managed and generally a low-cost option. 
  • Target-date funds are used for retirement planning and slowly reallocate your assets as your retirement age nears to become more conservative. 
  • Fixed-income funds are conservative funds that typically invest in various bonds and are a great solution for investors seeking to maintain their capital and receive a fixed income from their investments. Equity funds carry higher risk because they are primarily invested in stocks, but they can potentially return higher rates. 
  • International funds expose you to assets in other countries, which can provide diversification to your portfolio. 

Before investing in a mutual fund, you must read all the details of the fund and understand the associated fees (from buying, selling, and owning part of the fund), what it’s investing in, the fund’s investment strategy, and the associated risks of the fund. 


Get in the Investing Game with the Advisors at Five Pine Wealth Management

A tailored investment strategy from experienced and knowledgeable professionals (who also happen to provide kind, genuine, and personality-packed service) can help you manage your portfolio and answer questions. We understand that not everyone comes to us with the same level of knowledge and exposure to investing—that’s why we offer personalized customer service to our clients. 

At Five Pine Wealth Management, you will receive fiduciary service, meaning we will always put your best interests above our own and never sell you financial products you don’t need. To set up a complimentary consultation, contact us here or give us a call at 877.333.1015.