Guide to Investing

Investing for Beginners

On top of having a steady income from your job, investing is the best way to accumulate extra wealth over time. There isn’t one answer when looking to invest, but the common methods are:

  • A 401(k) or retirement plan: This is the first place you should put your investments. Investing in retirement plans is the smartest move to ensure you can enjoy your wealth after leaving full-time work. By putting away just as little as 1% of your pay check, your tax-free savings will slowly but surely compound into a sizable amount.

  • Index funds: This method is perfect for a beginner investor with limited time, knowledge, and cash. Rather than paying for a fund manager to maintain your portfolio, you can split your investments across a market index with lower expense ratios.

  • Exchange-traded funds: ETFs operate similarly to index funds as they track a market index, like the S&P 500, and have lower fees than mutual funds. However, ETFs are traded continuously and investors buy them for a minimum share price, which can fluctuate.

Investing Tips

  • DIY investing: If you are willing to put in the time and effort to research, you may want to consider opening your own brokerage account or finding a personal stock broker. This means you have more control over your portfolio as you need to keep track of your stocks regularly.

  • Passive investing: For someone new to investing with limited time and knowledge, hiring someone to invest for you may be the better option. Robo advisors operate on digital platforms which invest in mutual funds or ETFs once you have outlined your investing goals and tolerance for risk.

  • Diversify your assets: An “asset class” groups similar kinds of investments. Investing in a diverse group of asset classes gives you a well-rounded portfolio, which can make your savings more resilient to a fluctuating stock market. For those who are more cautious, diversifying your income may lower unwanted risks and get you involved with a range of interesting investment opportunities.

  • Terminology: Whether you hire a robo advisor or invest alone, it never hurts to know common investing terminology to make you feel more confident when tracking your portfolio.

Saving for Investing

Getting in to investing is a smart choice but is a complicated process. It is important to do your research and ensure you are financially confident before you decide to move around your hard-earned income.

  • Build money saving habits: The more money you save, the more you can invest to add to your wealth. Start by keeping track of monthly costs and where you can save money. For example, Atlanta Gas Light offers discounts rates to save money on monthly utility costs. You can also save by making coffee at home or limiting your takeaways and leisurely spending.

  • Pay off debt: If you are already burdened with high-interest debt, you may find yourself in a worse off position with fluctuating investment returns. Paying off debt is not only responsible but is an essential step before taking the risk of possibly losing more money. By minimizing the money coming out of your account, less money is taken away from possible investments.

  • Keep a safety blanket: Having a sizeable amount of savings in the bank for unforeseen emergencies is always a priority. As a rule of thumb, try and save at least 3 to 6 months’ worth of living expenses by putting away a portion of your income monthly. If any investments fall through, you are more likely to bounce back with an emergency fund.

Conclusion

Investing is not just for the rich. As long as you do your research and invest smartly, there is no excuse not to invest extra savings to grow your wealth.

 

Finance