Expert Reviewed How to Increase Your Income
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Purchase stocks and bonds. A stock represents a stake in a company. When you own a share of a stock, you are a part owner in the company and have a claim on every asset and every penny in the company’s earnings.[6] A bond is a financial IOU from a company or the government. Companies and governments issue bonds to fund their day-to-day operations or to finance specific projects.
- When you buy a bond, you are loaning your money to the issuer, whether it’s a company or a government body, for a certain period of time. In return, you get interest on the loan, and you get the entire loan amount paid back either on a specific date (the bond’s maturity date) or a future date of the issuer’s choice. For example, if a bond is valued at $1,000, and pays 7% a year, it has an interest value of $70.
- You can invest in stocks and bonds by buying them individually or by buying them via a mutual fund. A mutual fund is a collection of stocks, bonds, or cash equivalents, or a mix of all three.[7]
- Talk to a financial advisor about the right mix of stocks and bonds for your financial portfolio. When you are young and just starting to invest, you should put money in stocks. The long term potential growth of stocks will outweigh the risks. Over time, as you get older, you should scale back on your investment in stocks. Bonds are less volatile and they are good long term investments. Over time, as you get older, increase your investment in bonds.[8]
- Be wary of investing in hard assets like real estate or gold. These are unstable and unpredictable assets that can be difficult to manage.[9]
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