Groceries, rent, debt payments, and utility bills might seem affordable when you’re just starting out. However, once you’ve mastered the basic expenses and set aside some emergency cash, it’s time to start investing. The tricky part is deciding how much to invest and in what.
If you’re a newbie to the world of investing, you may have a lot of questions. We’ve created a guide to help you get started with your investments.
Invest as Early as Possible
If you start investing when you’re young, you’ll see solid returns on your money. This is due to compound earnings, where your investment returns start earning their own return. This also allows your account balance to grow with time.
Of course, there will be ups and downs in the market, but when you invest young, it means that you’ll have decades to ride them out, and years for your money to grow.
Decide How Much to Invest
This decision should depend on your investment goal and when you want to reach it.
One of the common investment goals is retirement. Your first investing milestone is easier if you have a retirement account at work. It is recommended to contribute at least enough to that account so that you earn the full match.
Generally, for retirement, you should aim at investing a total of about 10% to 15% of your income each year. While it might sound a little difficult now, you can work your way up to it with time.
If you have other investment goals, consider the amount you need and your time horizon, and then, work backward to break down that amount into weekly or monthly investments.
Open an Investment Account
Even if you don’t have a 401(k), you can invest in a traditional or Roth IRA, for retirement in an individual retirement account.
You might want to avoid retirement accounts if you’re investing for another goal since these accounts are designed for retirement investments and thus, they might have restrictions on when you can use this money. Instead, opt for a taxable brokerage account, when you can remove money at any time.