Now that you have completed reading “Girls Just Want to Have Funds” by the founders of Female Invest, we hope you feel confident enough to put the work into practice.
One of the most essential things to financial well-being is finding a way to make you money work for you, through investing. A common misconception is to think you need lots of money and an extensive amount of knowledge to start getting into this topic. Allow this article to serve as a summarized guide on how to get started. Note that, we also include suggested brokerage accounts to start your journey of investing with.
Step 1: Figure out what you’re investing for
Figuring out what you’re investing and when it needs to be realized is the silver lining that needs to be defined in order to determine your strategy.
Most people start off by investing for retirement. In fact, investing something toward retirement should be pretty high up on your financial to-do list right after
Step 2: Choose an account type
Once you determined what you’re saving for, you need to open an account. Chances are, you’ll want to start investing with one of these 3 main account types:
Brokerage account: When people talk about trading stocks, they’re typically talking about doing so in a brokerage account. You can think of a brokerage account as your standard-issue investment account.
401(k): This is an employer-sponsored plan account for investing for retirement. You can generally only invest in one through work. If you’re not sure if you have access to one, check with your employer’s HR department. Some people may instead have access to a 403(b) or 457(b) account, which are similar.
Individual retirement account (IRA): This is an account for retirement that you can open and invest in on your own (i.e., not through work). Although there are different types of IRAs, here we’re focusing on so-called “traditional IRAs”.
Step 3: Open the account and put money in it
Where to Open your Account
This depends on the type of investment you are going to make. For a 401k this is always done with your employer. For an IRA or brokerage account you would have to sign up through a separate financial institution.
How much to put in?
The appropriate amount to start investing with or to add each month depends on your income, budget, and other financial priorities. Hence, there is no single magic number that applies to all investors. But if you’re having trouble with this stage, keep in mind that starting small is preferable to doing nothing at all.
A good strategy is to start little by little each month and gradually increase your investment as you get more comfortable. At some point, try to save 15% of your income annually for retirement (including any employer match). If you choose to invest in an IRA or brokerage account, try about setting up automatic payments so you can continue to do so each month.
Step 4: Pick investments
This is the stage where most individuals get lost. It may seem as though others have some sort of investment choosing trick up their sleeves, allowing them to pick the greatest assets. But, the reality is that there isn’t.
Most people focus on getting a broad range of common-sense investment types, rather than placing all your bets on a small number of high-promise investments. There are 3 basic methods:
Buy individual stocks and bonds – This is the most complicated and labor-intensive way, but it’s what many people think of when they hear “investing.” If you want to go this route, you’ll need to learn about researching stocks, building a diversified portfolio, and more. Fortunately, there are easier ways for beginners to get started.
Buy 1 or more funds or ETFs – Mutual funds and ETFs are packages of stocks and bonds, almost like a pre-filled grocery basket you can buy. You can use them like building blocks, putting a few together to create a portfolio. Or, you can buy an all-in-one fund, which is an easy-to-manage diversified portfolio in a single fund.
Hire a professional – If you’re getting stuck, consider getting help. While this may sound like it’s only an option for the wealthy, there are low-cost options that can meet your needs too. For example, so-called “robo advisors” can offer low-cost professional management, because the day-to-day money management is handled by computers rather than live humans. (Learn more about robo advisors or explore other management and advice options.)
Step 5: Relax, but Monitor
Now that you have started investing and ensured that you have a diversified portfolio by not having all your eggs in one basket, periodically check on your strategy.
- Whether the account or accounts you’re using are still a good fit for your situation.
- Whether you’re contributing enough to your investments (chances are you’ll be able to increase your contributions over time as your pay increases).
- Whether your big-picture investment mix, and the specific investments you own, are still a good fit for your goals, risk tolerance, and time horizon.
