How do I know what to invest in?

There are three questions to ask when you're picking where to put your hard-earned money. Answering them will inform what you should focus on when it comes to building an investment portfolio.

Broadly speaking, you don't want to tie up your money in investments you don't understand. So be sure you know the investment works, and what it aims to do for you. And especially take note of the risks involved.

You also need to decide where you'll be keeping that investment. You might have access to a 401(k) plan through your employer, and that might even come with an employer match to whatever money you invest through it, so that's definitely something to take advantage of. You can also open brokerage accounts on your own, whether they're taxable accounts or a retirement account like an IRA. And where you invest also has tax implications, so it's important to think about this when picking accounts.

Finally, you'll need to consider the investment's larger impact on your financial plan. If you're investing for retirement and have several decades until then, you've got a long enough timeline to take on more risk in your investments than someone who is just a few years from retirement, for example.

When people talk about investing, you might assume they just mean putting money into the stock market, but this isn't the case at all. You have so many options to invest that don't involve stocks. Bonds are another big category of investments, and you can buy bonds from companies as well as from governments of all sizes.

You can invest in real estate, either by buying property yourself and renting it out, or by putting money in REITs (real estate investment trusts). You can also invest money in businesses owned by people you know, or even in your own business. You can look into alternative investments like cryptocurrency, or into physical assets like precious metals. Some people invest in art or collectibles. Stock marketing investing is perhaps the easiest option, but as you can see, it's not the only one. Different people have different financial goals and risk tolerances, and you can tailor your investments to fit.

You may be interested to learn that you can even make a difference with your money by investing. A lot of people are interested in values-driven investments. So don't assume that you must put your money in things you don't care about. A CERTIFIED FINANCIAL PLANNER™ can help you get started with this.

Going back to that 401(k) option you might have through your employer, you might wonder where the money you add to it is going. And it's a good idea to find out, because just because you have money in the account doesn't mean that it's actually invested. Sometimes that cash is just sitting in the account, as cash, where it won't grow very much (about as much as it might earn in a fairly average savings account).

Sometimes it'll be automatically invested for you, perhaps in a target date fund, which is pegged to a certain date (often when you expect to retire). Either way, it's something you need to check up on. Your company's human resources department should be able to tell you what happens with your money in that account, or you can check yourself. A CERTIFIED FINANCIAL PLANNER™ is a great investing resource, and if you need help with this, they can certainly check into it for you.

You have options for investing – it is your money, after all! Your CFP® profesional can help you find the right mix of investments to support your goals and plans.