Thinking about investments can feel daunting in the same way that strength training can. When you finish listening to this episode you’ll feel empowered to think about investments as a way to help you build wealth.

In the same way that strength training will help you get faster, your investments will help you race toward financial independence. Listen in to hear how you can use investments to improve your financial strength.

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Investments are like interval training

When you are trying to get stronger in the swim, bike, or run segment of a triathlon, you will probably do some interval work. Interval training includes working hard for a period of time and then taking a short break before working hard again.

While you don’t increase your speed during each interval, over time with rest, you may find yourself going faster or improving your endurance.

The stock market works in a similar way. The market may go up for a while then go down–up again and then down. While there is no guarantee that investments will go up continuously, they have increased in value over a long period of time. Historically, the stock market goes up for seven out of ten years.

What is a stock?

A stock is a share of fractional ownership in a company. Stocks are a way for companies to spread ownership amongst thousands rather than having only one owner.

Investing in only one company at a time is seen as risky. A way to lessen the risk of Investing in the stock market is by purchasing a diversified portfolio of stocks that follow an index. Diversification is a way to spread the risk across companies and industries.

Investing in stocks is a great way to grow your money over time.

What is a bond?

Bonds are typically smoother and less volatile than stocks. Whereas purchasing stocks is a way to own a small share of a company, a bond is a loan to an entity. A bond is an agreement to pay the money back with interest over time. In the same way that you shouldn’t invest in single stocks, nor should you invest in single bonds. Instead, find a high-quality, diversified portfolio of bonds.

Learn more about how to use stocks and bonds to increase your financial fitness on this episode of Money Mile.

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