When it comes to investing, there are a wealth of options to consider. For the average investor, it can be overwhelming. We’ll break down the options to help find the right path to make your money work for you.
Investment can encompass many things. But at a fundamental level, all investments break down into three categories – stocks, bonds, or cash. “People tend to overcomplicate investing,” shared Michael Cox, Certified Financial Planner and President of Coastal Bay Wealth Management. “If you buy a mutual fund, that mutual fund is going to buy stocks, bonds, or cash.”
Stock investments are what most are familiar with. “Stocks are what we refer to as ownership. If you own stock in a company, you own a part of that company because it’s publicly traded,” explained Nicholas Manns, Vice President of Coastal Bay Wealth Management. Stock can be common, which entitles the owner to dividends and a vote at a shareholder meeting, or preferred stock, which offers the benefit of a fixed yield.
Bonds work much differently. “A bond is more of a debt instrument in which you loan your money to a corporation or a municipality, and you essentially become the bank the same way an individual buys a mortgage for a house,” said Manns. There are many types of bonds with varying risks, rated on their credit quality. BBB-rated bonds or higher can be considered good investments for the right investor. Anything below this may offer a higher yield but is a much riskier investment.
Cash investments include checking, savings, and money market accounts, CDs, and government securities. They offer much lower rates of return, but offer the flexibility to access funds quickly.
While these are all great investments, there is no one-size-fits-all solution. For many investors, the best fit is likely a combination of tools within each category. Understanding the nuances of each takes years of research, which isn’t always practical for the average investor. That’s when working with a Certified Financial Planner, who has hundreds of hours of rigorous education and passed a two-day, 10-hour exam, can reap dividends.
When working with a professional, it’s important to find someone you can trust. “An immediate red flag would be if you were presented with an investment recommendation before a planning meeting even occurred. You need to have a deep dive into what your financial picture looks like today, whether it's on the asset or liability side. If you are presented with a recommendation before you have a financial plan, it's just not in your best interest,” shared Manns. “That’s what we view as one of the problems in our industry. They want to know how much money you have and recommend a product before they ever get to know you. And that, in our mind, is just the wrong approach,” explained Cox. For the team at Coastal Bay, getting to know their investors as friends first is important. That allows them to better understand their needs and make the best recommendations to meet their goals.
Whether you’re just getting started or have been investing for years, having a solid understanding of the options available today will ensure your money works hard for you. Don’t be afraid to seek out professionals to make your options clear and investing easy.
Coastal Bay Wealth Management
The advisors at Coastal Bay Wealth Management are independent wealth management advisors offering the resources of Raymond James Financial Services. Coastal Bay believes in focusing not only on your investments but asset protection, liability management as well as legacy and estate planning are the keys to long-term financial wellness. To learn more, contact Michael Cox and Nicholas Manns at coastalbaywealth.com.
Any opinions are those of Michael Cox, Nicholas Manns, and Coastal Bay Wealth Management and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Investing involves risk, and you may incur a profit or loss regardless of the strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Coastal Bay Wealth Management is not a registered broker/dealer and is independent of Raymond James Financial Services.
People tend to overcomplicate investing - Michael Cox, CFP ®