- Pre-Funding the Cost
- Your Pre-Funding Strategy Depends upon where You Are Now
- Monthly Investment Program
- Your Investment Objective
- Understand Risk
- Basic Strategies
- How Is Investing for College Different from Other Investing?
There are several kinds of risk. The two that we will discuss here and that you need to consider are market risk and inflation risk.
Cash-type accounts (bank accounts) are designed to provide safety of principal. You put a dollar in—you get a dollar back with some interest. The value of your account increases because your principal earns interest and your interest earns interest.
Bonds, or notes (less than ten years to maturity), are designed to pay you a fixed rate of interest over the life of the bond. They typically pay a higher return than cash accounts. When the bond comes due (matures), you get your principal back in full (assuming it doesn't default). Prior to maturity, the value of the bond can go up or down depending primarily on the direction of interest rates.
Common stocks offer the potential for even a higher rate of return; but the value of your investment is subject to even greater volatility over the short-term. The stock's volatility is subject to market conditions and the financial well-being of the company you've invested in.
To sum up, market risk is the measure of how much the value of your investment can vary.
History shows us that investing in common stocks means that risk in the short term is greater than the risk in the long term. It suggests to those who need their money soon, not to invest in stocks.
Inflation RiskThe higher the inflation rate, the higher the cost of college will be when your child attends. If you do not put your money in investments that stay ahead of inflation, your college investment strategy will not be effective because your investments will actually lose value over time.
Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Franklin Mint Federal Credit Union and Mint Wealth Advisors are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Mint Wealth Advisors, and may also be employees of Franklin Mint Federal Credit Union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, Franklin Mint Federal Credit Union or Mint Wealth Advisors. Securities and insurance offered through LPL or its affiliates are:
|Not Insured by NCUA or Any Other Government Agency||Not Credit Union Guaranteed||Not Credit Union Deposits or Obligations||May Lose Value|
*The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with residents of the following states: NJ, PA, NY, DE, AZ, MI, FL, MD, TX, VA, GA, NC.
Financial Learning Center content created by TrueBridge, Inc. The information provided is based upon sources and data believed to be accurate and reliable. The content contained herein is intended for information and illustrative purposes only, should not in any way be construed as a personal recommendation, and should be used in conjunction with individual professional advice.