Here are five steps to start investing this year:
- Start investing as early as possible
Investing when you’re young is one of the best ways to see solid returns on your money. That’s thanks to compound earnings, which means your investment returns start earning their own return.
2.Decide how much to invest
How much you should invest depends on your financial situation, investment goal and when you need to reach it. One common investment goal is retirement. As a general rule of thumb, you want to aim to invest a total of 10% to 15% of your income each year for retirement.
3.Open an investment account
If you’re one of the many investing for retirement without access to an employer-sponsored retirement account like a 401(k), you can invest for retirement in an individual retirement account (IRA), like a traditional or Roth IRA.
4.Pick an investment strategy
Your investment strategy depends on your saving goals, how much money you need to reach them and your time horizon. If your savings goal is more than 20 years away (like retirement), almost all of your money can be in stocks. But picking specific stocks can be complicated and time consuming, so for most people, the best way to invest in stocks is through low-cost stock mutual funds, index funds or ETFs.
5.Understand your investment options
Once you decide how to invest, you’ll need to choose what to invest in. Every investment carries risk, and it’s important to understand each instrument, how much risk it carries and whether that risk is aligned with your goals. The most popular investments for those just starting out include:
Stocks
A stock is a share of ownership in a single company. Stocks are also known as equities.
Bonds
A bond is essentially a loan to a company or government entity, which agrees to pay you back in a certain number of years. In the meantime, you get interest.
Mutual funds
A mutual fund is a mix of investments packaged together. Mutual funds allow investors to skip the work of picking individual stocks and bonds, and instead purchase a diverse collection in one transaction.
Exchange-traded funds
Like a mutual fund, an ETF holds many individual investments bundled together. The difference is that ETFs trade throughout the day like a stock, and are purchased for a share price.
By Brianna McGurran
Culled From: https://www.nerdwallet.com/article/investing/how-to-start-investing
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