Still Learning About Investing? 5 Things You Should Know
Investing is well-known for being a strategy that adds to a financial portfolio. Unfortunately, it’s not a particularly accessible topic. 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 about it in school. In addition, 44% of Americans have avoided investing completely because they don’t feel they understand it well enough to get started.
Luckily, investing can be started very simply. Though you might not see immediate growth, over time, investing can prove to be very profitable, especially for retirement. Here’s how you can start to earn thousands of dollars by making the right investing moves.
Know Why You’re Considering Investing
Before you start investing, make sure you have the disposable income to do so. No investment is worth spending money you need for living expenses. If you have debt, it’s best to pay that off first before you begin making any sort of investment.
It’s also good to know your overall goal with investing. Are you trying to save for something in the future, or are you trying to make money as soon as possible? This also dictates your risk profile. The higher the risk of an investment, the higher likelihood it could deliver more money, faster. However, you could also lose more money very quickly as well. “Fast” is also a relative term. That could mean after a year or five years. As a new investor, time is your friend. The more time you give your investment, the more your investment will compound. Any fund that promises to get you money immediately is dishonest. Investing takes time to really see results.
Pick Investments that Fit Your Situation
Once you have some money that you feel comfortable parting with (at least for a little while), you’ll need to decide where you want to invest your money. Stocks are probably the most common investment you’ve heard of, but they are riskier, so if you’re nearing retirement, they’re not as safe of a bet as bonds or high-yield CDs (certificates of deposit).
Diversify Your Investments
Another reason why giving your investments time is that the stock market will fluctuate–sometimes very dramatically. A drop of 20% in a year is actually considered completely 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 takes a turn for the worse, your whole portfolio won’t plummet with it. There is no miracle stock that is worth all of 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 in safer investments like bonds.
Find a Broker That Will Work With You
Online stock brokers will all cost you around the same amount, but they’ll differ in how they can help you. Some brokers like Fidelity provide resources for you to learn tips about investing. They also allow you to talk with an advisor and ask all the questions (there are no dumb ones) that you may have so you feel comfortable. They can also help you pick the right funds to allocate your money toward so that your portfolio is strong. After all, this is your money, and you should feel good about how it’s being invested.
Start Now and Keep Investing!
Since time is your friend, the best time to start investing is now. Once you’ve started, make sure to stay up to date with your investments, and talk to your advisor frequently to see if the choices you’ve made still work for where you’re at in your life and career. If you can, keep putting more money in so it pays off even bigger in the long run.
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Methodology: GOBankingRates surveyed 1,012 Americans aged 18 and older from across the country between March 8 and March 9, 2022, asking 16 questions: (1) Do you consider yourself financially literate?; (2) Where did you learn most of your financial literacy?; (3) Which financial topic do you think you should have learned more about in high school? (Select all that apply); (4) Which financial topic do you still feel you need more education on in 2022? (Select all that apply); (5) When you were growing up, did your parents talk to you about how to manage your money?; (6) Do you think high schools are lacking in financial education?; (7) How has a lack of financial education cost you the most?; (8) At what age did you become comfortable with basic money skills (i.e., writing a check, balancing your accounts, budgeting)?; (9) At what age did you start saving and planning for retirement?; (10) How do you feel about how you used your 2021 American Rescue Plan stimulus check?; (11) Which financial topic did you feel the need to learn more about due to the COVID-19 pandemic? (Select all that apply); (12) What do you not understand about the Child Tax Credit? (Select all that apply); (13) Which part of the homebuying process is most confusing to you?; (14) Which part of the car buying process is most confusing to you?; (15) Are you prepared for the student loan debt moratorium to end in May?; and (16) How are you changing your driving habits with the rising gas prices? GOBankingRates used PureSpectrum’s survey platform to conduct the poll.