Investing can be intimidating – especially if you’re just starting out on your own. While you want your money to work as hard as you do, it can be difficult to determine where to start.
Should you open an IRA account or put all your money in a 401(k) account? What are bonds? How should you adjust your investment strategy as you age? What is a 529 plan? As an investment novice, the fear of failure and seemingly endless choices can lead many people to completely avoid investments altogether.
But investing doesn’t have to be scary. And it’s not just for people with large amounts of disposable income. In fact, the earlier you start investing, the more you can take advantage of compound interest.
Here are some ways you can get your feet wet when it comes to the world of investments.
Set a budget.
Determine how much money you’d like to set aside on a monthly or yearly basis towards an investment opportunity. This simple step can have a huge impact when it comes to planning for your future.
You will also want to get a handle on your finances by understanding exactly how much money is coming in and going out. This will help you control spending and manage debt. Most importantly, it will help you methodically save and invest, which is essential to building your net worth.
Learn the basics.
Although you don’t need to become an expert in all aspects of investing, we recommend you arm yourself with some basic knowledge about stocks, bonds, mutual funds and basic investment strategies. Your broker can help you with this, or you can seek out information from reliable online sources such as the Investor Protection Trust or the FINRA website, which features a Getting Started section for new investors. (While you’re there, take the Investor Knowledge Quiz to see how you stack up!)
Find a financial advisor.
This is a crucial first step in investing, especially if you are just starting out. An advisor will be able to give you guidance and counseling as you embark on your journey. FINRA (the Financial Industry Regulatory Authority) has a tool called Broker Check that lets you search your current or prospective broker’s name to see employment history, certifications and licenses – as well as regulatory actions, violations or complaints you might want to know about.
At MidWestOne, our team of investment professionals will give you the personal attention you deserve. They’ll help you create a strategic direction for your investment needs and be there for you every step of the way with actionable insights and expertise.
Understand the costs of investing.
Before you open an investment account, you should ensure you understand the costs that come with purchasing investments once the account is open. You’ll need to consider commissions, fees and other management costs. Don’t be afraid to ask about these – that’s what your advisor is there for!
Don’t throw all of your life savings into your first investment. Start small – even $50 or $100 per month is enough to begin with. The single most important thing when it comes to investing is getting started. Start small, then increase investment contributions as your income grows, and as you gain more confidence in how investing works.
Where should you invest?
Working together with your financial advisor you should be able to determine where to invest your money. Are you taking advantage of your employer’s match? Should you be investing in a Roth IRA? What are the benefits of a 529 plan? These are a few of the questions that your advisor will be able to answer. By talking it through, together you’ll be able to find the right strategy for your unique situation.
Getting into investing can be challenging. But if you ease into it and keep our pointers in mind, you’ll start to feel more comfortable in no time.
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