Investing is one of the best ways to expand your wealth, but it may seem intimidating at first.
Start by setting investing goals and setting a timeline to reach them, before assessing your comfort with risk and how your investments will be managed (by yourself or with help) so that you can decide how best to invest. This will give you direction as to the types of investments and accounts best suited to you.
What is Investing?
How2Invest is a great way to enhance the growth of your savings accounts beyond interest alone, but choosing an approach that aligns with your financial goals, risk tolerance and time horizon is key.
Starting to invest can seem intimidating. But investing doesn’t need to mean trading on the New York Stock Exchange or hiring a financial advisor; you can open a 401(k), 403(b), or IRA account, open a brokerage account, or use automated services like SpeciFi or Robo-advisors like RoboAdvisors like RoboAdvisor for easier investing.
Whichever strategy you pursue, make sure it aligns with your goal(s). Here are a few pointers for getting started.
What are the Benefits of Investing?
Investing can help you grow your wealth over time and create a brighter future, but the process can be intimidating for new investors as there are numerous choices and contradicting advice available to them.
Investment success hinges upon aligning your investments with your financial goals. Take time to assess what matters to you most as this will help determine your goal(s). This timeline of potential goals is known as your “investment time horizon.”
Your financial goals can be accomplished with an investment portfolio tailored to your needs, consisting of various assets that help buffer against market fluctuations and inflation while building wealth over time.
How Much Can I Afford to Invest?
Investment is key to meeting your financial goals, so investing as much of what is within your means should be prioritized when creating your investing strategy. Take into consideration your capacity and risk tolerance; make adjustments as your goals shift; review it frequently!
At first, it is essential to establish your long-term investment goals. This will allow you to narrow down your options and prioritize accounts accordingly.
If you don’t have much money to invest, try our savings calculators and setting aside small amounts throughout the year as savings calculators use dollar cost averaging to build up a strong investment portfolio on even modest budgets.
How Long Should I Leave My Money in the Market?
Ideal, an emergency fund should contain enough savings for three to six months of expenses before investing. This will help avoid temptation to withdraw from investments or use high-interest credit cards to meet short-term needs that may cost more in terms of interest and fees than what your investments could earn in return.
Long-term goals like retirement should be invested for at least 30 years to give your investments time to grow, according to Stacy Francis, president and CEO of Francis Financial in New York City. A typical portfolio might consist of 40% stocks and 60% bonds.
How Can I Invest in Stocks?
Investing in stocks can be one of the best ways to build wealth over time, but getting your finances organized and understanding the stock market are essential first steps.
Consider your goals, the amount of time and risk tolerance available for investing, as well as recent market volatility. While it might be unnerving at times, having the appropriate financial plan in place shouldn’t stop you from taking action.
Once your plan is in place, ensure to monitor your investments regularly – once or twice every month is an ideal frequency to start with. Remember that stocks offer greater growth potential than bonds or cash alternatives and should therefore form the backbone of most portfolios.
How Can I Invest in Bonds?
Bond investing is another effective way to generate income. Bonds involve lending money to either a government or company and receiving interest payments in return. They’re generally less risky than stocks and help diversify your portfolio.
Some bonds offer fixed or floating rates of interest; the best approach for you will depend on your financial goals and time horizon.
Bonds can be purchased individually or through mutual funds and ETFs, which remove much of the guesswork out of selecting individual bonds by organizing them by type and duration. Furthermore, there are organizations which rate quality so you can easily compare bonds against one another to determine which has the greatest chance of fulfilling its promises.