Investing 101
By starting at a young age, Philip Swenson, professor of finance at USU, said if an individual invests just $25 or $50 a month, they would be amazed at how much money it would grow into.
“By starting young, you can plan for long-term wealth accumulation relatively easy,” Swenson said. “It is just a matter of investing.”
Swenson said investing is simply placing the money into debt or ownership securities for the purpose of making a rated return over time.
Kent Haueter, a certified financial planner at Harold Dance Investments, said there are different types of investing, such as the stock market and real estate. It all just depends on the person.
“For each person who is looking into investing, there is a different situation,” Haueter said. “It all depends on what they are trying to accomplish, and it depends on the amount of time they have to invest.”
Swenson agreed and said the key to wealth depends on the time horizon a person has set.
“The key to wealth is not very difficult to understand,” Swenson said. “It is starting young and pursuing the systematic and periodic course of continuous investment through time.”
Swenson said in his investing classes, he encourages his students to run to the bank and open an IRA account. An IRA account, he said, is a type of an account that meets the internal revenue service qualifications for special tax treatment.
“If you save money in an IRA account, all the money that you contribute to that account is not part of your taxable income,” Swenson said. “And not only that, but all of the accumulations and growth that occurs, or the interest and dividends that you might make in that investment, grow tax deferred. So you are essentially making money on what you otherwise would pay as taxes.”
Swenson also said IRA accounts are great ways to save money for retirement.
According to the article, “Investing Basics,” written by Joan Gray Anderson, Kristin DiSpirito and Claudia Kerbel, individuals know there is a large difference between investing and savings, but many people frequently get the two mixed up.
The article states the goal of investing is to increase the principal and get a greater return, whereas the goal of saving is to preserve one’s principal, or original dollars saved, so it will be available whenever needed.
The article also stated that while most types of savings are readily accessible, some have a maturity date and require a penalty for early withdrawal. However, most investments are not easily accessible and do carry a penalty for early withdrawal.
Haueter said if an individual has questions on investing, their best source is to find someone who has knowledge in a variety of areas concerning investing.
“Find someone who has the capability to answer your questions about all types of different investments, from real estate, mutual funds and stock,” Haueter said. “You can even find a lot of information on Web sites now. But it has now reached a point where there is almost too much that you can become confused.”
Swenson said online investing has now become a very cheap and quick way to begin an account.
“Students are now savvy enough that they can go online to some of the big online broker accounts. Online you can now fill out the application for an IRA account, or any other account for that matter,” Swenson said. “It is a very cheap and easy way to access mutual funds and investments that go into the account.”
Swenson also assured that for anyone looking into investing, only one qualification is necessary to start investing.
“You have to invest in these types of accounts with earned income,” Swenson said, “so basically anybody can do it.”
-courtnie.packer@aggiemail.usu.edu