Tags: compounding | financial markets | invest | investing | investment vehicles | reward | risk | stock | wealth

Investing is how you make your money grow.  With the magic of compounding a small investment may grow large overtime.

With funds to invest and a desire to make money, the investing alternatives include leaving the money in a bank account, buying a certificate of deposit, buying a bond, buying stock, or even investing in real estate or a business venture.  The individuals investment goal, time horizon and risk all factor into the choice.

Deciding to invest in the financial markets comes with the need to balance risk and reward.  On the reward side it’s all about profit and return on investment.  We buy stock to achieve superior gains, as the long-term average return of return of stocks is 11.5%.  Historically stocks have been solid investments.  The challenge is buying the right stock or company.

The risk side of the equation is the tolerance the investor has to absorb loses.  The investor time horizon also plays a part.  A 30 year old person investing in a retirement account may choose an aggressive path as the have a long time horizon to grow the value of their account before taking the money out.

Ultimately, investing becomes tool for us to grow our wealth.  Multiple factors come into play on the best types of investment vehicles to use.