New Year’s Resolution for Investing: How to Get Started
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Whether you’re trying to save a lot of money or pay off debt, a New Year usually calls for revisiting our financial goals.
However, as we have just passed through another pandemic year, the importance of our financial well-being is even more pronounced. More and more people are recognizing the importance of having an emergency fund, a good credit rating and an investment strategy so that you can increase your net worth.
The good news: all of these financial goals are very achievable with a little work and dedication. If you are specifically interested in starting to build your wealth, there are ways to make it easier to invest that is low risk and not involving day trading stocks, a trend we have seen take off with many young and new investors during the past year. pandemic.
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Here’s how to start investing in the New Year
Fortunately, investing in the stock market has never been easier. You no longer need a large sum of money or the expertise to put your money to work for you.
“No need to look into complex treatises on the subject or dizzying paintings”, says Margaret Price and Jill Gianola, co-authors of Single Women and Money: How to Live Well with Your Income.
Start simple, with a tax-efficient retirement fund, such as a 401 (k) sponsored by your employer or an IRA (Individual Retirement Account) that you set up on your own, explains Price and Gianola.
With employer-sponsored plans, see if your 401 (k) offers target date funds to get you started. With a target date fund, you choose a fund based on the year you plan to retire. For example, if you plan to retire in 2050, you would choose a fund closest to 2050. As your target retirement year approaches, your fund will rebalance to reduce the number of riskier investments. âThis easy-to-grab offer does the investing work for you,â Price says.
When choosing an IRA, young investors who expect to be in a higher tax bracket when they retire should opt for a Roth IRA over a traditional IRA. With Roth IRA, you pay taxes up front by contributing after-tax dollars, and later in retirement, your withdrawals are tax-free (as long as your account has been open for at least five years).
With traditional IRAs, however, you delay paying taxes until you withdraw funds from your account later in retirement. You can find Roth IRAs at big brokerage houses like Fidelity Investments, as well as online brokers like Ally Invest, but more and more fintech companies like SoFi and Wealthfront are offering IRAs as well.
Invest beyond your retirement account
If you don’t know much about investing, a robo-advisor can be a good tool to help you get started. Using algorithms and data, robot advisers are essentially software platforms that invest on your behalf. The best robot advisers automatically rebalance your portfolio from time to time based on your risk tolerance, market conditions, and other factors.
Betterment, for example, will recommend a portfolio based on your goals and risk tolerance, and it will automatically adjust whenever you make a deposit, withdraw funds, or change your target allocation. There is no minimum balance required for Betterment Digital Investing, and the annual account fee is 0.25% of your fund balance.
You can also consider using an investing app that makes it easier than ever to invest small amounts or micro-invest. Microinvesting simply means that you regularly invest small amounts of money in the market so that over time your contributions add up. This is a good strategy for beginners who want to dip their toes into the investment pool before they take the plunge.
Acorns is a microinvestment app that allows users to invest the “spare currency” they accumulate from their daily purchases in things like coffee and groceries. (NBCUniversal and Comcast are investors in Acorns.)
Charles Schwab recently launched the Schwab Starter Kit â¢, aimed at new investors. Schwab will match your initial deposit of $ 50 with $ 10 in fractional shares in each of the top five S&P 500 companies. The kit provides educational content (short videos and step-by-step guides) on how to weather market fluctuations. and protect against volatility. Investors will have access to budget planners, easy-to-use tools to ensure their investments are in line with their goals, as well as 24/7 investment professionals.
At the end of the line
If investing is one of your New Year’s resolutions, kudos to you for prioritize your future. It’s easy to get started, whether your first step is signing up for a tax-efficient retirement account, or going beyond your 401 (k) or IRA and using a robo-advisor, app, or kit. stock from a broker for beginners.
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Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.