When you decide to invest your hard-earned money, it goes through the financial landscape like a tiny explorer navigating a vast and complex world. For you, it is like planting a seed in the hope of receiving a bountiful harvest.
But have you ever wondered where your money actually goes when you make an investment? If you have, you’re in luck! Read on to find out.
Investing in Stocks: Owning a Piece of Companies
One common destination for your investment is the stock market. When you buy stocks, you’re essentially purchasing ownership (shares) in a company. Your money becomes a valuable asset on the company’s balance sheet, and you become a shareholder, entitled to a portion of the company’s profits, known as dividends.
Your investment supports the company’s operations, growth initiatives, and innovation. So, when you invest in stocks, your money goes into the engine that drives businesses forward. It’s like having a stake in the success of companies and sharing in their prosperity.
Stock prices fluctuate based on market demand, company performance, and other economic factors.
Investing in Bonds: Lending Your Money
Bonds are essentially ‘debt securities’, where investors lend money to governments, corporations, or other entities in exchange for periodic interest payments, known as coupon payments, and the return of the bond’s face value, known as the principal or par value, upon maturity (at the end of the agreed term). Click here to read all you need to know about bonds.
Bonds come in various types, including government bonds (issued by governments), corporate bonds (issued by corporations), municipal bonds (issued by local governments), and more specialised bonds like mortgage-backed securities (backed by pools of mortgages) and convertible bonds (which can be converted into common stock).
In essence, when you invest in a bond, you lend your money to someone else in exchange for regular interest payments as well as the bond’s original value at maturity.
ETFs Investment Process
Typically, the most common investment to make if you are going at it alone is into an ETF (Exchange-Traded Funds). You can find out exactly what an ETF is and our guide to how to choose the ETF or Index Fund for you by clicking here.
When you invest in Exchange-Traded Funds (ETFs), your money typically goes through a series of steps within the financial system. Here’s a simplified breakdown of where your money goes:
To summarise, your money is invested in the underlying assets held by the ETF, and the ETF shares represent your ownership in those assets until such time as you choose to sell the fund.
How To Get Your Money Back: Selling Your Investments
Getting your money back from investments involves several steps, and the process can vary depending on the type of investment you’ve made. Here’s a general overview of how you can receive your invested funds:
It’s important to note that the time it takes to receive your investment proceeds can vary. Stock and ETF sales are generally settled within a few business days, whilst bond transactions and mutual fund redemptions may take a bit longer.
Additionally, some investments, such as real estate and certain alternative investments, may have longer exit timelines and specific processes for cashing out. Always check with your Patterson Mills Financial Adviser or financial institution for the specific procedures related to your investments.
Master the Investment Process with Patterson Mills
Investing your money is a powerful tool for building wealth over time. It’s not a one-size-fits-all endeavour, but rather a maze with various paths to choose from. Understanding where your money goes when you invest, how to make informed investment choices, and how to retrieve your funds when needed are crucial aspects of your overall financial planning and investment strategy.
Patterson Mills have the knowledge and experience to ensure your money is invested in the right places and remains under your control throughout your investment term. Investing requires patience, research, and a clear strategy.
So, whether you’re considering venturing into stocks, bonds, mutual funds, or other investment vehicles,get in touch with us todayand book your initial, no-cost and no-obligation meeting. Just send us an e-mail to info@pattersonmills.ch or call us direct at +41 21 801 36 84 and we shall be pleased to assist you.
Please note that all information within this article has been prepared for informational purposes only. This article does not constitute financial, legal or tax advice. Always ensure you speak to a regulated Financial Adviser before making any financial decisions.