It’s always financial wise to have a savings account and an emergency fund. But what should you do with money that you don’t plan to use for at least a few years? Investing is a great way to earn money while also building your profile.
For most people, the idea of investing is daunting. But you don’t have to be a stock market expert in order to make smart investment decisions. In fact, investing is a lot easier than most people think.
Here are steps to take if you’re serious about investing your money.
Set a Goal
Wanting to invest your money is a smart decision, but what are your investing goals? Do you want to maximize your retirement savings? Looking to make money by investing that you can then use in 5-10 years? Investing without a clear goal can cause you to make risky decisions that can be costly.
With a goal in mind, you can make investment choices that allow you to work towards that goal within a set timeframe.
Choose an Investment Approach
Putting your money into the stock market gives you many different avenues of investing that you can take. You can choose to manage the money on your own or you can choose to hire an investment advisor to manage it for you through a full-service brokerage. What’s nice about having an investment advisor is that they have all of the experience and insight that’s needed to make your money grow.
You can compare the best financial advisors in Orlando online. You’re also likely to find investment advisors available at one of your community banks.
If you prefer to manage your money on your own, you can avoid the high service fee that often comes with having an advisor. But what if you don’t know where to invest your money? An inexpensive option to help you diversify your investment portfolio is to use a robo-advisor.
A robo-advisor uses algorithms to pick diversified investments for you. These decisions are based on your investment goals as well as your risk profile.
Open an Account
Once you’ve figured out who will manage your investments, the next step is to open an investment account. There are many factors that you’ll want to consider when choosing a brokerage, including:
- Trading platform
- Minimum deposit requirements
- Available investments
- Fees for buying and selling assets
Ideally, you want to choose a brokerage that offers free trades, low commission or commission-free investments, and an online trading platform. If you’re looking to use a robo-advisor, make sure that the brokerage you choose offers that service.
Make Your Initial Deposit
After opening an investment account, it’s now time to make your initial deposit. Most brokerages allow you to transfer money from your checking or savings account into the investment account. Generally, you don’t pay a fee for transferring money into the account. You can also choose to mail a check if you prefer that method.
Depending on which type of account you’ve opened, you’ll want to be aware of any restrictions you have. For example, if you want to contribute to an IRA account, be aware of annual contribution limits.
Aside from retirement investment accounts, you generally don’t have to worry about contribution limits. The more you invest, the more earning potential you have.
Know Your Investing Options
No matter if you have a standard investment account, a 401(k), or a Roth IRA, you are able to choose what to invest in. Understanding all of your investment options helps to ensure that you make a wise decision that will help you meet your investing goals.
One way to invest your money is through stocks. Stock, also known as equities, is a share of ownership in a company. As an investor, you’re able to purchase stocks for a share price. Stock prices can range anywhere from a few dollars to thousands of dollars.
Another option for investing is with bonds. A bond is a loan to a government entity or a company. With a bond, there’s a set time frame for when the borrowing entity must repay. Over the course of repayment, you’ll earn interest.
Bonds are less risky than stocks, but they earn lower long-term returns. If you’re looking to best invest your money, you don’t want to put too much of it into the bond market.
A mutual fund is a combination of investments put together. With a mutual fund, you don’t have to worry about picking individual stocks and bonds. Instead, you’re able to purchase a diverse collection in a single transaction. This means upfront, your investment is diversified and offers low risk.
Investing is a great way to make your money work for you. If you’re new to investing, be sure to keep these tips in mind so that you can minimize risk and watch your money grow over the years.0