What are investments made up of?

Whether you’re newly arrived at a place in life where you have money you want to put aside for your retirement, or you’re now starting to look deeper at money you’re already invested — you’re probably encountering a LOT of new terminology and ideas and wondering if you need an economics degree to understand it all. Nope, just a willingness to — as a writing teacher once put it — apply your butt to your chair and take in some information. Let’s start with: what kinds of things you can invest in. Below the video, details on stocks, bonds, and inflation.

Below, behold a 2 minute video explaining the kinds of things you can invest in.

To make it super clear, here’s the outline:

  1. Option set 1: Invest in The Market, like:
    1. Stocks – money you put into a company, whose value is determined by a collective fiction that says “this company is worth money,” and which (hopefully) pays out dividends when the company is worth more money. Or, which disappears if the company tanks. More on stocks below the video.
    2. Bonds – money you loan a government. You know, for their helpful projects*. As stable as the government you loan to, not known for huge returns. More on bonds below the video.
    3. Mutual funds – collections of stocks and/or bonds a human puts together.
    4. ETFs – collections of stocks and/or bonds an algorithm puts together, so they tend to have lower fees than mutual funds.
  2. Option set 2: Invest in Assets, featuring:
    1. Property: houses, apartments, antique cars, anything you could resell [and need to insure]
    2. Your gold bullion would go in here, and so would bitcoin.
  3. Option set 3: Invest in People.Technically won’t “beat inflation” but is playing in such a different court that doesn’t matter: the idea here is that raising up others itself has a positive economic impact. This set includes:
    1. Nonprofits (you can get a tax writeoff for a donation)
    2. Activist Groups, Collectives
    3. Individual Fundraising
    4. Education for yourself or others
    5. Social welfare projects
    6. Local business

Where do you start investing? Check out your options when choosing between an IRA, individual investment and rouge stock purchases here.

Can you invest in the market and stay aligned with your ethics? Yeah if you do your homework, so check out these options. (And read below.)

A note on bonds

I was saying to myself: what if we could buy bonds but designate the funds for, say, social welfare, what would happen? Asking for a friend who’s part of a donor advised fund called real democracy. Then I learned about the Domini Bond Fund principles and realized someone already thought of this.

“If you think of a bond as a loan, the key questions for responsible lenders should be: To whom am I loaning my money and for what purpose?” And so they state two long-term goals of their bond selections, “universal human dignity and the preservation and enrichment of the environment.” Thus they invest heavily in the US, but “We do not invest in U.S. Treasuries or Russian government debt, as these instruments partially finance the maintenance of these countries’ nuclear weapons arsenals.” BOOM. Instead, they buy local bonds, housing bonds, and green bonds. So color me corrected – you can put your money where your home is and buy a bond that doesn’t directly fund a war machine.

A note on stocks

Are there companies that are less violent, degrading, and corrupt than the US government? This is not a trick question: the answer is yes. It’s hard to keep up when your motivations are colonial domination, and there are even a few publicly traded companies who state that the preservation of the earth and all life forms is more important to them than profit at any cost. Gee thanks.

Point is, you have options when it comes to buying stocks, and there are plenty of evil, lesser-evil, minorly-evil, and barely-evil options. Check out my research on socially responsible investing here, for starts.


A note on inflation

Do people around you ever say things like “I remember when the subway was $1!!” What they’re talking about is inflation. Quite simply, the price of things goes up. So, when you’re saving money with the express purpose of using it in 20, 30, 40…years, you want it to “keep up with inflation.” Why? Because the subway will not still be $2.75 then. Either we’ll have had a socialist revolution and it will be free, or it will have gone up in price.

Currently the inflation rate is 1.4% – so, you want your savings to at LEAST earn that much money this year in order to be “worth” what it was when you socked it away. And generally, you want your money to do better than that for years when inflation jumps up. It’s about being able to afford to “ride the subway” in 30 years. (This is why you should NOT plan on hoarding $20s under your bed btw). If you want to play I Remember When, try using this Inflation Calculator.