Starting to commit money can be an intimidating task. Between the news headlines about cloudy reports and markets of consultants stealing money from duped clients, hiding the money under your mattress may seem compelling. Earning money in areas it will not earn interest is seldom a good option. If you begin with a few basic principles and learn more about how investments work, your time will be rewarded with a better comprehension of the financial markets and also with accounts that perform successfully to meet your objectives.
Write down your goals. The National Endowment for Financial Education recommends beginning your investment plan with a detailed list, including the time frame and amount needed to reach each goal. This will help you narrow the huge number of investment options into a smaller pool of choices that have historically helped others meet goals similar to yours.
Keep emergency funds. If the market drops and your car breaks down at the same time, you won’t want to tap into depressed investment assets to repair a muffler. The Securities and Exchange Commission recommends beginning a savings account to cover six months of expenses. This will give your new investment portfolio a buffer as you begin picking investments to meet your longer-term goals.
Decide on the tax structure of your investments. If you’re going to save for retirement, ask your human resource people at work about a 401k or similar plan. This will allow you to save money on taxes while you invest. If you aren’t eligible for a workplace plan, research traditional and Roth IRA plans. Some of these plans allow you to contribute as little as $50 per month to an eligible mutual fund if you sign up for automatic monthly investments.
Find appropriate investments for your goals. Many beginner investors start with mutual funds. Mutual funds will allow you to pool money with many different investors to buy diversified investments. The Investment Company Institute offers a free online guide to mutual funds that can help you understand how to choose a good fund for your portfolio.
Open and fund your accounts. If you enjoy working alone, an online brokerage firm may be your best option because fees are considerably lower on investment trades than a full-service brokerage house. Full-service brokers may cost more, but you’ll have an investment professional who has passed tests required to help people find suitable investments for their goals. Because not all brokers are created equal, ask friends for referrals and check the BrokerCheck tool on the Financial Industry Regulatory Authority’s website to make sure your potential broker has a clean track record.
Being Smart Investor
First comes marriage, then comes discussing financing as a couple. If a few envelopes full of cash were among your wedding presents, you and your spouse have some choices to make. Investing some of your money makes sense for both the present and the near future. The invested funds would be from your bank accounts so that you can not spend it right away and suitable investing offers you a chance to increase it over time. Purchasing might look like something for professionals, however with proper research, it is possible to certainly do it yourself.
Determine what you and your spouse (or significant other) want to accomplish with your money. Outline both your short-term and long-term financial goals and possible expenses, such as saving for a house purchase or funding retirement.
Set aside a portion of your money as a “rainy day” fund for unexpected expenses, such as job loss or car repairs. This money should be invested in a way that will let you draw on it if needed, such as a savings account.
Discuss your goals with others who have financial knowledge; you may choose to go to a financial adviser as well as talking with knowledgeable family or friends who care about your future. Inquire about the proper ways to invest your money to line up with your goals.
Diversify your investments. You’ve heard the advice to not “put all your eggs in one basket” and this goes for your nest egg as well. Allocate your money among savings accounts, stocks and bonds, among other vehicles.
Spread your risk. Since you’re just starting out, you can afford to invest in some higher-risk areas, such as stocks for fast-growing younger companies. You have many years before retirement so you can afford to ride the highs and lows of the stock market. You should also have some safer investments.
Review your investments and goals periodically. Keep an eye on what works and what doesn’t and adjust your portfolio accordingly.
Investing Money Wisely
Investing money could be exciting and excruciating. As financial markets rebound tremendously, a little less enthusiasm may be just what the doctor ordered. If you’ve ever wondered how to invest wisely to manage market fluctuation with confidence, you’ll discover that some homework can help you find some fairly simple solutions. Although you are never going to make the financial markets a much safer place, wise investment choices will allow you to respond with ease and avoid panic when markets experience turbulence.
- Financial Web: 4 Ways To Invest Money Wisely
- U.S. Securities and Exchange Commission: Invest Wisely
- National Endowment for Financial Education: Investing Basics
- Securities and Exchange Commission: SEC Guide to Saving and Investing
- Kiplinger: How to Invest With $500 or Less
- MSN Money: Investing 101– Buy Your First Stock or Mutual Fund