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Investing 101 For Beginners

The hardest part of investing is getting started.

People have lots of reasons why they don't invest... from a lack of knowledge to a lack of funds. We've heard every excuse.

We've shared a lot of advice over the years via classroom discussions and “live” workshops for new, young and older investors to follow.

A great place to start and we've discussed intensively is the importance of diversification and asset allocation - for successfully and safely building your portfolio. Unfortunately, that’s hard to do for someone who's just getting started and may have little money and experience. So, what does one do? 

Contributing to a 401(k) is a quick and simple way to start it all off which can help grow your investment account over time. Many employers match contributions up to a certain limit... These contributions are free money and the biggest 100% - safe return you will ever receive.

Let’s look at an example: If you contribute 8% of your salary, and your employer matches half of that up to 4% – a fairly typical employer contribution – you've just earned an instant 50% return on your investment. Awesome!!!

Of course, options in a 401(k)’s, 403(b)’s, and 457 deferred compensation plans are often limited. Your employer chooses a plan manager and works out the investment options that will be included. Most plans have a decent range of funds to choose from, like mutual funds and index funds.

The benefits of investing in mutual and index funds are that you get instant diversification, which is helpful for smaller investment accounts. However, the biggest challenge with employer retirement plans is that the employee usually does not have the knowledge, experience nor help to select the appropriate investment options funds for their portfolio. 

And when you leave your employer, you can "roll" your 401(k) balance into an IRA, which is one of the best ways to truly take control of your investment options. Now, you’ll have access to any stock, mutual and index fund that the world has to offer.

Anyone can invest.  The sooner you start, the more your wealth will grow over your lifetime. So, even if you're not ready to begin investing at this moment, make sure you're at least saving money.

 

Happy Investing, 

- James



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