The finance world is filled with terms that can be confusing to most people. Here is a look at some concepts that you should know when it comes to investing and managing your money.
A 401(K) is a retirement savings plan offered by companies to their employees. You are deducting a part of every paycheck, which is then invested. Your savings will continue to grow until your retirement. Your savings will be tax free during this period. Many companies will match the money that you are personally contributing to the 401(K).
Compound interest involves you making an initial investment and adding a fixed percentage to it every year. The value will continue to rise every year, allowing your investment to grow at a faster rate than other options. When used correctly, this can be a powerful tool to help you accumulate wealth.
An IRA is another retirement savings account option. Everyone can open an IRA regardless of the employer. You will be contributing money until you reach a set dollar amount.
A mutual fund is a collection of bonds and stocks that are managed by an investment company. Mutual funds help you invest in multiple companies.