Investing is well known for being a strategy that adds to a financial portfolio. Unfortunately, this is not a particularly accessible subject. According to a recent GOBankingRates survey of 1,000 Americans, 51% say they still need more education in 2022 and 52% wish they had learned more in school. Additionally, 44% of Americans have avoided investing altogether because they don’t feel like they fully understand it to get started.
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Fortunately, investing can be started very simply. Although you may not see immediate growth, over time investing can be very profitable, especially for retirement. Here’s how you can start earning thousands of dollars by making the right investment choices.
Know why you are considering investing
Before you start investing, make sure you have the disposable income to do so. No investment is worth spending the money you need for your living expenses. If you have debt, it’s best to pay it off before you start investing.
It’s also good to know your overall investment objective. Are you trying to save for something in the future or are you trying to make money as soon as possible? It also dictates your risk profile. The higher the risk of an investment, the more likely it is to return more money, faster. However, you could also lose more money very quickly. “Fast” is also a relative term. This could mean after one year or five years. As a new investor, time is your friend. The more time you give to your investment, the more your investment will compound. Any fund that promises to give you money immediately is dishonest. Investing takes time to really see results.
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Choose investments that suit your situation
Once you have money that you feel comfortable parting with (at least for a little while), you will need to decide where you want to invest your money. Stocks are probably the most common investment you’ve heard of, but they’re riskier, so if you’re nearing retirement, they’re not as safe as bonds or high-yield CDs (certificates of deposit). .
Diversify your investments
Another reason you give your investments time is that the stock market will fluctuate, sometimes quite dramatically. A 20% drop in one year is actually considered quite normal. The best way to weather these stock market storms is to make sure your investments are diversified. In other words, don’t put all your eggs in one basket. Invest in multiple funds in addition to stocks to ensure that if one goes bad, your entire portfolio doesn’t go down with it. There is no miracle action that is worth all your money.
One way to calculate how much you should invest in stocks versus fixed income assets like bonds and CDs is to take your age and subtract it from 110. Say you’re 30, that means 80% of your investments should be in stocks, while 20% should be invested in safer investments like bonds.
Find a broker who will work with you
Online stockbrokers will all cost you about the same amount, but they will differ in how they can help you. Some brokers like Fidelity provide resources for you to learn investment advice. They also allow you to speak with a counselor and ask any questions (there are no silly ones) you might have to feel comfortable. They can also help you choose the right funds to allocate your money to so that your portfolio is strong. After all, it’s your money and you should feel good about how it’s invested.
Start now and keep investing!
Since time is your friend, the best time to start investing is now. Once you’ve started, be sure to keep up to date with your investments and talk to your advisor frequently to see if the choices you’ve made are still a good fit for where you are in your life and career. If you can, keep investing more money to pay off even more in the long run.
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Methodology: GOBankingRates surveyed 1,012 Americans ages 18 and older from across the country between March 8-9, 2022, asking sixteen different questions: (1) Do you consider yourself financially literate? ; (2) Where did you acquire most of your financial literacy? ; (3) What financial topic do you think you should have learned more about in high school? (Select all that relate to it); (4) What financial topic do you still think you need more education on in 2022? (Select all that relate to it); (5) When you were growing up, did your parents talk to you about how to manage your money? ; (6) Do you think high schools lack financial education? ; (7) How much has the lack of financial education cost you the most? ; (8) At what age did you become comfortable with basic financial skills (i.e. writing a cheque, balancing accounts, budgeting)? ; (9) At what age did you start saving and planning for your retirement? ; (10) What do you think about how you used your 2021 US bailout stimulus check? ; (11) What financial topic did you feel the need to learn more about due to the COVID-19 pandemic? (Select all that relate to it); (12) What don’t you understand about the Child Tax Credit? (Select all that relate to it); (13) What part of the home buying process is the most confusing for you? ; (14) What part of the car buying process is the most confusing for you? ; (15) Are you ready for the student loan moratorium to end in May? ; and (16) How are your driving habits changing with rising gas prices? GOBankingRates used PureSpectrum’s survey platform to conduct the survey.