Hey everyone, I’m Judy Copenbarger!
Today I’d like to talk to you about something that’s so important but I know it can be very confusing for those of you wondering how to make your finance tree grow. We’ve talked about how to get better with money and grow that savings account. Today we’re going to discuss investing and specifically, how to invest for beginners.
Let’s dive in!
Now you may find it intimidating to determine where to invest your hard-earned money when just starting out, but I’m excited to share a few great ways to begin that will help give you the confidence to start investing. There are so many ways to invest your money it could drive you crazy!
Your First Investments
You may be asking yourself, “what options do I have that make it easy for me as a beginner investor?”. Well, a great way to start, and one which is often overlooked is with your very own employer. Have a chat with your HR rep. That’s the person who handles human resources at your company. Ask him or her about any retirement options that they offer.
Often your employer provides options for retirement accounts like your 401(k) where you can put your money in and your employer matches a percentage of the money that you contribute. That’s free money! You might also consider the popular Roth IRA. This is an Individual Retirement Account that offers similar tax benefits.
Unlike the 401(K), the money you contribute is taxed when you deposit it, but the invested money can grow and be withdrawn at retirement with no additional taxes. These two accounts are most people’s very first investments.
That was easy, what else is there?
One of the biggest fears when investing as a beginner is wondering if you’re making the right choices. Don’t worry, we’ve all been there.
Living in modern times, we have this great solution called Robo-advisors. For beginners, robo-investing can be absolutely perfect because you can start with any amount of money and they automatically invest in a way that it’s appropriate for you.
You will be asked a series of simple questions that help you clarify your goals and with regular deposits, the rest is done for you. No matter what the investment is, we’re always looking for ways that are easy, lower cost, and lower risk.
Consider the amount of risk you are willing to take and read up on the types of investments your robo-advisor will be making for you. For example, riskier portfolios will lean towards a higher percentage of stocks rather than bonds and index funds. These types of investment tools are a great way to get started without substantial investment knowledge. As you learn more you can become more hands-on with your investment strategy.
Financial Advisors and Brokers
If you’re like me and you appreciate the human touch, there is no shortage of stockbrokers, investment advisors, and firms that you could seek out. These folks will actively manage your investments and sit down with you to figure out a complete investment strategy. They may cost a bit more but being able to have a conversation with a person about your investment journey is the best way to learn. Expect to pay premium fees for expert advice and this personal touch.
Tips for Successful Investing
Before you get started, I want to leave you with three tips to take with you as you make some important financial choices.
1. Think Long Term
Remember that you want to make investments for the long term and by sticking with it, you take less risk and spend less money on the investments you’re making. Take your time when considering new investments and think about the 5-10 year horizon ahead. The fact is that even the expert investors are reliably beat by passive investment strategies showing us that stock picking and learning day-trading aren’t reliable ways to get ahead.
2. Consistently Contribute
Consistency is key, and as you earn more and save more, consistently contributing will make your investment baskets grow alongside your healthy saving habits. Scale your investments as a percentage of your income to maximize the amount of money working for you as you approach your highest earning years. Take advantage of compound interest which is the benefit of earning a percentage of interest on a steadily increasing amount. Now that’s money working for you!
As your investments start earning you profits don’t just take your winnings and run. Compound your success by reinvesting that hard-won money (also known as dividends), and attain that life you’ve always wanted even sooner. Create a money-making machine that will set you up for retirement.
Now that you have a great idea of how to invest as a beginner, take that confidence and get started today. What was your first investment? Please let us know in the comments below. If you found this article helpful, be sure to share it with someone who wants to start investing too.
God bless, and I’ll see you next time.
Judy Copenbarger is the Founder and President of Comprehensive Financial Services, based in Irvine, California.
She holds a Juris Doctor Degree, with a Taxation Emphasis, is FINRA Registered and maintains various Securities and Insurance Designations. Her professional expertise is in Estate Planning, Retirement and Education Planning.