Do you think investing is too risky, complicated or only for the rich? When it comes to risk, investing is a speculative endeavour. However, it’s not exclusively for people with more money than you, nor is it all that complicated.
Because the future is expensive. Consider the cost of education. People are living longer, too, which is great – but it equates to skyrocketing retirement costs. Granted, investing always carries the possibility of loss. But it also offers the possibility of growth – on a massively, compounded scale. Alternatively, keeping your assets in lower growth accounts leaves you more at risk of inflation getting the best of you down the road.
Can you afford to invest?
Investing is just one part of your master plan. Before you start dabbling in the markets, determine your net worth by comparing your assets with your liabilities. Your income versus expenses…input and output.
After dealing with debt and saving your daily, weekly or monthly quotient, let’s say the rest of your output accounts for 95% of your income. Use that 5%, those “extra” dollars, for investing.
Step 1. Hire a professional
If you have the time and energy, you can teach yourself the ropes of investing, but don't underestimate the value of experience. A financial professional, like a CPA, can help you define your investment goals and objectives, determine the level of risk that's right for you and create a comprehensive financial plan.
Learn more about the basics of investing…
Step 2. Allocate your assets
Keep your savings separate from your investments. The former are kept in certificates of deposit (CDs), checking accounts and savings accounts. The latter are beholden to the markets, fluctuating up and down, paying out interest and dividends – or nothing at all. Investments live in stocks, bonds, mutual funds, collectibles, precious metals and real estate.
Learn more about effective asset allocation…
Step 3. Understand your options
Financial management takes work. Rarely are dollars truly out of sight, out of mind. Nor should they be. Stay on top of where your money is by keeping good records and recalculating your net worth annually. This will help with tax planning in the immediate future and give you a picture of how your investments are performing over time.
Learn more about financial management options…
Losses happen, as do glorious gains. To end up on the right side of the coin, educate yourself and keep your portfolio diversified.Read More
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Out there in investment land, there are more than 14,000 mutual funds to choose from and 5,000-plus individual companies to invest in. Through a diversified portfolio and strategic asset allocation, you can dip your toe into quite a few of them.Learn More