Investment Planning

Learn How Investing Works

Investment Planning

Learn How Investing Works

Very few people stumble into financial security. For most people, the only way to attain financial security is to save and invest over a long period of time. If you’re not sure where to begin with investment planning, we can help!

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Two Ways Your Money Can Work For You:

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Interest & Dividends

When you invest in a bond or bond mutual fund, someone pays you to use your money for a period of time. If you buy stock in a company that pays “dividends” to shareholders, the company pays you a portion of its earnings on a regular basis. Now your money is making an “income.”

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Price Appreciation

When you invest in stocks or stock mutual funds, you’re buying asset that could increase in value. When you need or want your money back, you can sell the investment – potentially for a profit.

The reward for taking on investment risk is the potential for greater returns. If you have a financial goal with a long-term horizon, higher-risk assets such as stocks or stock mutual funds may be appropriate. Stable value investments such as cash, FDIC insured CDs or short-term investment grade bonds have lower risk and may be appropriate for short-term financial goals.

Risk and Return

To “balance” your portfolio’s risk and return, an Investment Planning Graphic investor should consider allocating their funds among three main asset classes – stocks, bonds, and cash or stable value investments.

To determine the appropriate allocation for stocks, a good rule of thumb is to subtract your age from 110. The answer, or result, is the percent of your portfolio that should be allocated to stocks. For example, a 40-year-old investor should have approximately 70% of their investment allocated to stocks (110 - 40 = 70). By following this rule of thumb and rebalancing their portfolio periodically, an investor reduces their risk as retirement nears.

By maintaining an allocation to stocks in retirement, an investor reduces the impact of inflation on their purchasing power of their savings.


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Call a Hills Bank Investment Professional today so you can begin to build wealth for tomorrow.

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Whatever your investment goal is, you should clearly understand both the role and the potential risks and rewards of each type of investment tool.

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