Tag: start investing

Step 11 of 12 Steps to Financial Wellness-Start Investing

by Advantage One, posted in Budgeting, Lifestyle, Saving, Tips & Best Practices

[With your retirement funds up and running, you’re ready to give your money its best chance at growth through your choice of investment options.]

The world of investing can be vast and confusing, especially to a first-timer. There are so many decisions to make, and each one carries with it the risk of loss, or the promise of growth for your money. No worries, though; Advantage One Credit Union can help! Here’s how to start investing in five easy steps.

Step 1: Define your tolerance for risk 

If you’re investing, you’ll need to be prepared for the reality of potential losses. There is no such thing as a “sure thing.” But how much losing can you take? 

Determining your risk tolerance is an important way to ensure you’re completely comfortable with your investment path. Your risk tolerance will likely vary according to your age and the time horizon you’re working toward; your risk capital, or the amount of money you can afford to lose; and your investment objectives, or what you hope to gain through your investments. 

  1. Define your investment goals

Why are you investing this money? Do you hope to save enough money for a down payment? Are you trying to fund your retirement? Do you plan to use this money to pay for your child’s college education? Or, are you looking for a way to grow your money without any real plans for its ultimate use?

Identifying your investment goals will help you choose your investment vehicles and the amount of money you’re comfortable investing.

3. Determine your investing style

Next, you’ll need to find an investing style that suits your personality and investing goals. Here are your basic choices:

  • Active management–personally managing your investments. This can be a great choice for an investor who is confident in their knowledge of the market and can make decisions they won’t regret. It’s generally not a choice that’s recommended to new investors.
  • Broker/financial advisor–allowing an outsider to manage your investments. There are several kinds of brokers you can choose: Full-service brokers will charge a higher fee, but they will also manage every aspect of your investments, including estate planning, retirement planning, financial advice and more. Discount brokers will have lower fees, but offer fewer services. A financial advisor will make investment decisions, monitor your portfolio and make changes as deemed necessary according to your indicated risk tolerance.
  • Robo-advisor–an automated option that typically costs less than a traditional broker and works with your goals, risk tolerance level and other personal details.

4. Choose your investment account

You’re ready to choose your investments! Here are some options to choose from:

  • Bonds–a loan to a company or government entity that agrees to pay you back in a specified amount of years. You’ll receive modest dividends until the bond matures. Bonds are low-risk, but tend to offer lower long-term returns.
  • Exchange-traded funds (ETFs)–individual investments that are bundled together and traded throughout the day, like a stock. Share prices are relatively low, making ETFs a great choice for small budgets.
  • Mutual funds–professionally managed pools of investor funds that focus their investments in different markets. Mutual funds are inherently diversified and can be a good choice for beginner investors.
  • Stocks–a single share or a few shares in a specific company. If you’ll be putting all your eggs in one basket, be sure to research your chosen company carefully.

5. Learn to diversify and reduce risk

Once you’ve started investing, you’ll need to monitor and adjust your portfolio on a regular basis for optimal performance. Most importantly, you’ll want to make sure your portfolio is diversified, or that your funds are divided across different investments and classes. Diversifying helps reduce your risk of loss by ensuring that one poorly performing investment won’t bring down your entire portfolio.    

Getting your feet wet in the world of investing can be super-exciting, but daunting. Follow the steps outlined here to get started.

Your Turn: Have you recently started investing? Share your best beginner tips with us in the comments.

How to Start Investing With Limited Funds

by Advantage One, posted in Tips & Best Practices

You don’t need a lot to get started investing

It may seem intuitiveStartInvesting_Featured that investing gives you the best benefit if you start early, but many people put off the task if they feel they don’t have enough information or money to start off the “right way.”

The good news is that you don’t need a lot to start investing, and there are many simple ways to begin. So, take the adage “There’s no time like the present” to heart, and follow these tips for making your first forays into the exciting world of investing.

Even if you only have a few hundred to a thousand dollars to invest, you should start now. Investments that are generally considered the safest, like bonds, are slow-growing and take time to make a big impact on your bank account.

Riskier investments, on the other hand, can experience big ups and downs while still maintaining an overall upward trend over the span of many years, so people holding these investments can earn big bucks if they have the time to stick with them over the long haul. The farther away you are from retirement age, the more you can afford to take big investment risks hoping for big rewards to match, because you have time to recuperate your funds if an investment goes south.

“The key, really, is simply to open an investing or retirement account and regularly transfer money into it, preferably automatically from your paycheck so you don’t forget or get side-tracked,” stated Kimberly Palmer, author of “Generation Earn” and blogger for U.S. News & World Report.

Now that you are inspired to start investing right away, you have to plan your strategy. Careful consideration at the start can help you avoid the potential disappointment and headaches that come when minimum deposit restrictions, fees and other costs catch you off-guard. Starting safe with investments in a 401(k) is a great way to begin. This lets you avoid the time commitment required to learn about the stock market, and it can give you the confidence you need to go forward to riskier investments in the future.

“Assuming you have a 401(k), save time and put your money into an index fund that mirrors the stock market (like an S&P 500 index fund),” states Personal Finance Expert M.P. Dunleavey for Betterment.com. “Or if index funds aren’t available in your 401(k), use a low-cost target date fund (keep the expense ratio at 0.5 percent or lower).”

Index funds are an especially good choice for people investing only a few hundred dollars, because many — particularly individual retirement accounts — have initial investment minimums as low as $250.

“After your initial investment, you can add as much money as you like, as frequently as you like, with no additional costs or commissions,” according to a December 2015 article by The Motley Fool. “You can purchase index funds directly from mutual fund companies, so there are no commissions to pay to a middleman.”

If you want to dive right into the stock market, you have to strategize to find the right way to invest your small sum because many brokers deal only with large accounts. The first thing to learn is the difference between the types of stockbrokers.

“Stockbrokers come in two flavors: full-service and discount,” according to Investopedia.com Writer and Co-founder of Second Summit Ventures Chad Langager. “As the name implies, a full-service broker provides much more in the way of service, but it only deals with higher-net-worth clients.”

With many discount brokers, you can open an account with a minimum of $1,000, but you should understand that you will receive fewer services than someone working with a full-service stockbroker would. Another option is to forgo a broker and tackle the market yourself.

“You also could purchase shares directly from a company through direct stock purchase plans,” says Langager. “Some of these plans have a minimum investment amount restriction, which ranges between $100 and $500.”

Now that you know the basics of investing with a small sum of money, cash in on your momentum and get started investing right away. And remember, if you need any advice about your particular financial situation, your local financial institution is your best resource.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.