7 things most Americans don’t know about investing

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Investing can seem like an intimidating way to start building wealth if you don’t know much about it. And the thing is, a lot of people are confused or unsure. According to Invest Right, a common obstacle to investing is simply not knowing enough to get started. Additionally, up to 39% of Americans have no money invested in the stock market at all, according to Bankrate. Here, we look at other aspects of investing that most Americans don’t know about in an effort to help educate you, the first step to growing wealth.

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You can learn the fundamentals of investing

If you think you can’t start investing because you don’t know how, information is available in many places, said Jeff Mains, financial expert and CEO of Champion Leadership Group LLC.

“Despite the booming brokerage industry being a hive of rivalry to provide the latest and greatest trading alternatives, most investors will find that the basic necessities can be found almost anywhere.”

You may consider reading books on investing to learn the terminology; follow personal finance websites and/or social media channels; or practice with stock simulators – tools that simulate stock market fluctuations without you needing to invest any money.

More advice: What to do if you have $500 to invest

Advisors are useless

If you think you need an investment adviser on hand, to whom you have to pay a frequent fee or a monthly retainer, you’re wrong, said Nate Nead, managing director at Invest.net. “Most retail investors don’t know…that it’s about four times as expensive to have an advisor that doesn’t add any value, dipping into your income with some type of fee,” he said. declared.

This conundrum has only deepened with the advent of the robo-advisor, he explained.

He said that while investors may want the security of someone to talk to about their funding and investing decisions, “they should pay by the hour for advice and let the markets and tools of today now do the work for them at a fraction of the cost”.

Read: Investing is changing – Do the experts think it’s for better or for worse?

You don’t need to cut your expenses to start investing

If your approach to freeing up money to invest is to cut expenses, Matthew Robbs, founder of Smart Saving Advice, asserted that “that’s 100% the wrong advice.” Instead, he recommends trying to increase your income and investing the extra money you earn.

“Starting a side hustle has never been so popular and many people are even turning these side hustle into full-time businesses. Something as simple as going to garage sales or thrift stores can easily bring in a few hundred or thousands of dollars per month.

See: 9 safe investments with the highest returns

Roth IRAs help you grow your money tax-free

You may have a Roth IRA, which stands for Individual Retirement Account, but you don’t know much about it. “It’s a very powerful way to save for retirement, allowing your money to grow tax-free,” said Andrew Lokenauth, personal finance expert and owner of Fluent in Finance.

“With a Roth IRA, you pay taxes when you put money in, and then you’re not taxed on capital gains or dividends while your investments grow in the account, or when you make a withdrawal at retirement.”

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The difference between market orders and limit orders

Be certain that you understand the nature of the buy or sell order you are placing on investments, encourages Hands. “Unlike market orders, which will be executed as quickly as possible regardless of the current market price, limit orders will only complete the trade after choosing the price parameters you are comfortable with. “

It is neither too late nor too expensive to invest in Bitcoin

Bitcoin, a form of cryptocurrency, may seem like a wacky investment option, especially since it has become quite expensive. But Lokenauth said: “One of the biggest misconceptions about bitcoin is thinking it’s too expensive and it’s too late to get started… Investing in bitcoin is easy. You you don’t need to own a whole bitcoin to gain visibility.”

Bitcoins are divided into units called “Satoshis” – divisible up to eight decimal places. One hundred million Satoshis constitute one Bitcoin. “Satoshis are a great medium of exchange,” he said.

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S&P 500 funds are one of the safest ways to grow your wealth

Lokenauth joins leading financial expert, Warren Buffett, on a kind of fund known as the S&P 500 fund. “To quote Buffett at his 2020 annual shareholder meeting, ‘In my opinion, for most people best thing to do is own the S&P 500 index fund.'”

The S&P 500 is made up of 500 of America’s largest companies, spread across 11 sectors, Lokenauth explained. “So investing in the S&P 500 is an easy and stress-free way to invest for the majority of people because you’re not betting on just one company, but rather 500 of America’s largest companies.”

According to historical records, he said, the average annual return from the inception of the S&P 500 in 1926 until today is about 11% per year.

So if you invested $10,000 in an S&P index fund and contributed $10,000 a year for 20 years, you would have invested a total of $210,000 in cash, but that amount would have grown to $793,274.56. based on S&P 500 all-time highs of 11%. rate of return compounded annually.

Even if you don’t know where to start, you can’t go wrong by learning more about investing.

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About the Author

Jordan Rosenfeld is a freelance writer and author of nine books. She holds a BA from Sonoma State University and an MFA from Bennington College. His articles and essays on finance and other topics have appeared in a wide range of publications and clients including The Atlantic, The Billfold, Good Magazine, GoBanking Rates, Daily Worth, Quartz, Medical Economics, The New York Times , Ozy, Paypal, The Washington Post and for many commercial customers. As someone who had to learn a lot of her money lessons the hard way, she enjoys writing about personal finance to empower and educate people on how to make the most of what they have and how to live. a better quality of life.

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