Start Investing 5 Steps

What does your future look like? Depending on where you put your money, you can get ahead and retire comfortably. To reach this magic number, try investing to get a solid return on your money. Some investment options are so easy to start, you will find yourself making effortless gains in no time, even while you are sleeping! Here’s how.

1. Pick a Goal & Start ASAP

Whenever you start investing money, you should have a goal in mind to focus on your priorities. If your goal is to save for retirement, then depending on when you start investing, you may want to focus on investments that will grow your money gradually and safely. Or, maybe you want to build wealth and increase the value of your assets. This may leave room to choose riskier investments. However you choose to invest, you should do it as soon as possible. The earlier you start, the more your money will work for you.

2. Choose an Account

There are different types of accounts you can open when you start investing. If you are trying to save for retirement, you may want to choose an employer-sponsored 401(k) or individual retirement account (IRA). These accounts are specifically designed to build a retirement nest egg, so if you take money out early, you can face penalties.

Another account option is a brokerage account. With a brokerage account, you do not encounter as many restrictions. This account allows you to withdraw your funds at any time as long as you pay taxes on any capital gains.

3. Determine How Much to Invest

How much you invest depends on a variety of factors. It depends on your income, budget, other financial priorities, and how it all lines up to meet your goal. With a 401(k), more than likely contributions are made through payroll deduction and may be matched by your employer. If your employer will match your contributions up to a certain amount, it is wise to invest as much as you can up to that threshold to get the most bang for your buck.

With an IRA or brokerage account, it is best to deposit a large sum of money into the account so it can begin accruing compound interest. Compound interest is when “you earn interest on both your initial balance – called the principal – and the interest that’s added to the balance over time.” You can always add additional funds at any point.

4. Pick Your Investments

There are four ways you can invest.

Stocks. Much like how a credit union works, stock is when a person buys a share of ownership in a company. Companies use these investments to continue their success and fund their growth. This does not mean you get to run the company, but you do have the choice to vote at shareholder meetings and possibly earn money periodically through dividends.

Bonds. Want a low-risk reward? A bond is a loan to a company or government that will be paid back with a guaranteed fixed rate of return. With a bond, you know how long it will take to get your money and how much you should have by the end.

Mutual Funds. With mutual funds, a company does the work for you. They pool your funds and diversify them into money market funds, bond funds, and stock funds. Consider this a one-stop shop for all of your investment needs.

Exchange-traded Funds (ETFs). ETFs operate like mutual funds. It is a pre-filled selection to create a diverse portfolio. The main difference is ETFs can be bought and sold like regular stock.

After you pick the best investment strategy for your lifestyle and goals, it is time to buy. If you have any questions about how to trade or make purchases, talk to a professional!

5. Relax & Check In

Once everything is set up, it’s easy. Just sit back and relax. Your money will work for you and grow over time. It’s best to check in every once in a while to see how your investments are doing. Don’t get too discouraged if the economy is rocky and has taken your investments with it. Remember the big picture and discount the short-term pitfalls. Reaching your financial goals is easy when your money works for you.