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When it comes to money, everyone is a little nervous these days. With the constant talk of inflation, a recession, rising interest rates, stock market ups and downs and more, many people are (understandably) worried.
Given the current financial climate, your first reaction might be to simply hold on to the cash you have. While it may provide some peace of mind, hoarding money in a checking account isn’t exactly a great option if you’re looking for growth. Instead, many experts always recommend investing your extra dough.
Now you might be thinking, “I am not an investment expert”, Where “I’m not a millionaire and I don’t have enough money to invest” but that shouldn’t discourage you. Every day, ordinary people like you and me can and should reap the benefits of a wise investment.
To help you get started, Brian Baker, Investment Journalist at Bankrate.com, shared his expert insight on how to start investing right now – no expensive brokers or expertise required.
Make sure you’re ready to start investing.
Before you start allocating some of your monthly income to investments, it’s important to honestly assess whether you’re in a position to do so. Baker says it’s wise to have paid off high-interest debt before directing your money to investments. He also agrees with many experts who recommend building an emergency fund before investing your money. When it comes to an emergency fund, the gold standard is to set aside three to six months of your monthly expenses in case of an unexpected medical bill, home or car repair, or other unforeseen costs.
Set realistic expectations for your investments.
If you go into investing thinking you’re going to get rich overnight, you’re in for a rude awakening. Investing is a long-term commitment, so it’s very important to be specific about your goals and timeline and use this information to determine which investments are best for you.
For example, if you’re saving for a down payment on a house, fixed income investments and money market funds are probably your best bet.
“If you don’t have any money to lose or if you think you will need the money you plan to invest in the next five years, the stock market is probably not the best place for that money” , Baker said. said.
On the other hand, if you’re saving for retirement decades from now, Baker says you can focus your investments more on the stock market because you’ll have time to compensate for large swings or losses that occur in the short term. term.
Understand your employer’s investment options.
Once you’ve decided you’re in a good financial position to start investing, the easiest way to get started is through your employer. These days, many companies incentivize employees to participate in their workplace pension plan by matching contributions up to a certain percentage. When you’re ready to begin your investing journey, Baker recommends checking with the human resources administrator at your job to see if they offer a 401(k) match. If so, take advantage of it by contributing the maximum that your employer will match. It’s like “free money,” says Baker. Who doesn’t want that?
One important thing to note about employer contributions to your 401(k): they often have a vesting period. This means that if you leave the company before the contributions vest, that money is no longer yours. Be sure to check with your plan administrator so you understand this timeframe and can plan any job changes accordingly.
Invest on your own with a robo-advisor.
If your company doesn’t offer 401(k) matching or you just want to start investing on your own, Baker suggests looking for a robo-advisor.
“They work like a sort of financial advisor, but at a much lower cost,” says Baker. To get started, head over to Bankrate to learn more about the best robo-advisors. Once you choose one, you’ll create an account, which will involve answering questions about your investment goals, risk tolerance, and timeframe. From there, the robo-advisor will offer you a few different portfolio options to start investing.
New investors should also be aware that the two options presented above do not have to be a decision. Baker says, “If you have the money to do both, the more you are able to save and invest, the bigger the pot of money you will end up with. If you have excess savings beyond what you can contribute to a 401(k), saving more through a robo-advisor or IRA is another great way to go.
If you liked this story, find out how to get back on track if you’re buried in debt.
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