It was a time when I was a fresh college graduate. I remember being on my own, learning about myself, trying to figure out how to navigate the post-grad social scene, and getting my bearings in the corporate world. It's obvious that any new graduate will have many things on their plates.
With so many things going on, investing may not be on your radar. There's still plenty of time to invest later if you have more money and time.
Trust me, I was thinking the exact same thing once. Here's the truth: time is your most valuable resource when it comes investing. You will reap financial rewards if you invest sooner.
Now, my post-grad years are behind me. I am grateful that my years in college led me from corporate America to owning my personal finance company. I have had the opportunity to touch millions of lives and hear their stories. This is one of the most common stories I have heard about my career.
"I wish I had started earlier."
You don't have the same wish to come true ten, twenty or thirty years later. Now is the time to start investing in your financial future, so you can reap all the benefits of financial planning and proactive investing.
Now, I understand that investing can seem daunting. What should you invest in instead? How often should you invest? How often should you invest? This article will provide some basic information about investing, so you can begin investing with confidence and sustainability for the long-term.
Do you want a better way of managing your money? Personal Capital's online financial tools are free and secure. I can see all my accounts, analyze my investments and plan for my long term goals like retirement savings.
Why you should invest… like, right now
Many people dream of retiring and spending their golden years at the beach with a fancy drink in hand, even though they may just be entering the workforce. This shocking truth will stop you from living your dream: If you don't invest you might not be able retire .
Today's economy has seen a dramatic rise in the cost of living. Many people are not able to retire comfortably at 65, as they were able 40+ years of work and receive a pension. The younger generation is less likely to have access to social insurance as a result of significant funding shortages. This could lead to dramatic reductions in social security benefits starting as early as 2034.
It is obvious that investing is very important.
This is not all bad news. There are many ways to get started with investing.
You can benefit from compounding, which is a very beneficial perk to investing. It allows you to earn both interest on your initial investment and all interest earned. Compound interest is a way for your money to earn the most interest possible as soon as it can. The longer that your money has the chance to increase in value, the more money will be available when you retire.
Ok, I convinced you to invest, but you don't know whereto begin. Let me simplify it for you in three simple steps.
Where to invest
The first step in investing is to decide whereto put your money.
There are many investment options and accounts to choose from. It's important that you remember that the best investment strategy is a diversifiedstrategy. This means that you can have multiple types of investments and accounts to which you contribute over time. Although this is the ultimate goal, it is perfectly acceptable if you take some time to build up a variety.
HYSA
You might want to start saving for an emergency fund by opening a High Yield Savings Account (HYSA). Although this account is not an investment, it is an important building block in your financial house. Although HYSAs work just like traditional savings accounts but offer a higher rate for cash, up to 50x more depending on which account you have. This account provides you with returns on cash that you don't touch for your day-to-day needs.
The best thing? They are generally very accessible and can be adapted to different financial situations. Some require minimum balances or automatic transfers. Others do not. Many HYSAs can be used online, so you don't need to visit a brick-and-mortar bank in person to withdraw or deposit your money. You can most of the time make all your HYSA transactions using your smartphone or computer.
Certificates Of Deposit
CDs, which are similar to HYSAs, offer another way to earn interest on your money. The term of a CD is for a fixed period of six months to five year. It will earn interest for the duration of the term but you cannot access the money until it is over. While you may earn more interest in your CD than traditional savings accounts, your money is not accessible.
CDs offer attractive interest rates and are considered extremely safe. They also have a guaranteed rate return making them a great account for new investors.
High yield savings accounts and certificates are both good options for short term goals and emergency funds . These investments work best when combined withother investment options that are better suited to long-term goals .
Retirement plan with tax-advantaged benefits
It's never too early to begin saving for retirement. A tax-advantaged retirement plan is a great place to start. These accounts (IRA/Roth IRA, HSA/401(k), 457 plan) allow you to set aside funds for retirement and provide tax benefits.
As a graduate, it is a good idea to start contributing to your retirement account regularly. This will allow you to save time and help reduce financial stress in retirement.
Are you feeling overwhelmed by the number of retirement account options available? Personal Capital can help you plan your retirement. This free tool will allow you to design a retirement savings plan that's tailored to your income and goals. It also provides all the tools necessary to track your progress towards your goals. It's never been easier to invest in your financial future.
Mutual Funds
Investors love mutual funds because they allow them to invest in stocks and bonds that would otherwise be difficult to find.
ETFs
Although mutual funds and exchange-traded funds offer investors similar opportunities to invest in stocks or bonds, ETFs are more appealing for new investors because they have a lower price point than mutual ones.
Individual stocks
Stocks are the most popular investment option in pop culture, but they are only one of many options.
You are basically buying a small fraction of ownership when you invest in stock. The performance of the entire economy and the company will affect the stock's value. Although building a portfolio can be very rewarding, it will take a lot more time and research to determine which stocks will be profitable for you. It is easy to fall into short-term trading habits that are not beneficial for the long term, as stocks' prices change every hour of the day.
How much should you invest?
After you have determined where you want to invest, you need to decide how much you would like to put aside.
This amount will depend on your income and expenses. After creating a budget, I allocate a set amount each month to my investments. You will be more likely than not to follow through on your investment goals if you have a dollar amount set aside for it. This is why I like to set up automatic transfer to my investment accounts.
As a graduate, you might not feel that you have much extra money to invest in your investment portfolio. It's okay to be a new graduate. There are many types of investments so even if you have $50 from your grandma, it's possible to get started investing. The compound interest principle means that your $50 can grow exponentially over time.
Reevaluate your financial plan every six months, or whenever your income/expenditures significantly change. You can avoid lifestyle creep and keep on track towards your financial goals.
How often should you invest?
New graduates have a shortage of time. It's not time that's important.
There is good news! You don't have to be actively involved in the stock exchange every day to become a successful investor.
If you like to keep up with market trends and checking your stocks, then feel free. For the average investor, who wants to increase their net worth and plan for their financial future with minimal effort, it will be a relief to know that they can choose an investment frequency that suits them best.
My investments are usually active between once and twice per month. I have plenty of time to keep track of my investments and be aware of any changes. This allows me to continue growing my portfolio without becoming overwhelmed or burnt out from having to put in too much effort and time.
For new investors, here are some tips
Although I am 28 years old, my international reputation as a money coach is not permanent. A few years back, I was just a recent graduate and was also learning how to navigate the vast world of investment. I learned a lot by trial and error and sometimes wished that someone was just a few decades ahead of me to give me tips and tricks.
You're welcome to join me in sharing my wealth of knowledge. These are the top financial tips I wish I knew sooner.
Your #1 financial priority is an emergency fund
I'm sure I spent a lot of time ranting and raving about why it was so important to invest now. I stand by my stance. The exception to this rule is if you do not have an emergency fund. An emergency fund should typically cover at least 3-6 months of your essential living expenses in case of an emergency.
I get what you're thinking. "But I want my net worth to grow and prepare for my future financial goals through investing – isn’t that more important that an emergency fund that is just going sit there?"
Trust me, I completely get where you are coming from. Although investing might seem more appealing and exciting, having an emergency fund is essential.
Life can throw curveballs at us when we least expect them, or when we are feeling like we are moving towards our goals. Unexpected car repairs, unplanned medical expenses, and suddenly losing a job are all things we don't want to happen while we work to grow our net worth and prepare for our financial future. This could lead to financial disasters that will cause us to lose our financial goals.
My personal pro tip? My personal tip? Even if you don’t use your emergency fund it will still work for you and earn some additional cash. Win-win.
Be aware of the fees
Depending on what type of investment you make, fees can be charged for everything from maintenance to transactions. These fees can seem very small initially, but they can add up over time and reduce the value of your investments. It is important to know what fees you can expect from your brokerages or mutual funds.
Some people choose to work with a broker instead of being "DIY" traders. You may decide that the brokerage fee you pay is worth it if you have someone else manage your investments. It doesn't matter if the fees you pay are aligned with your financial goals or values.
Auto Pay is your investment BFF
You're a busy grad. Trust me, you may not have the time or energy to invest right now. Sometimes things can get out of control, especially when you have twelve plates spinning at once.
Auto-pay is the solution. Automated transfers let you put your investing on "autopilot", so you can continue contributing to your investment accounts without additional effort or time.
You can also put your investments on autopay so the money is automatically taken from your account. This will ensure that you don't have to be tempted to spend it on anything that isn't in line with your long-term financial goals.
This option is perfect for investing in your HYSA or 401(k) or IRA. It can be set up online or over the phone in a matter minutes. You can also choose a monthly investment amount if you have a taxable brokerage account. It's easy.
Investing in long-term is a game
You've probably heard of Wall Street "big" people, and those who lost it all.
Realistically, investing is a long-term endeavor. Many successful investors invest in a diverse portfolio and keep their investments for many years, despite the fluctuations of the market.
Careful about where your investment information comes from
Reddit boards, Twitter threads and other forums have made it easier to find information about investing. However, this can sometimes be a blessing as well as a curse if the information is distorted, out of context or simply wrong.
Unfortunately, not all internet users are interested in your best interests when it comes investing. Make sure you only trust reliable sources.
Personal Capital is my tool for tracking my net worth, progress towards my goals, such as retirement, debt repayment, and (yes!) even getting married. Saving the first $100k.
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By: Tori Dunlap
Title: School of Investing: Investing Basics for New Grads
Sourced From: www.personalcapital.com/blog/investing-markets/investing-basics-for-new-grads/
Published Date: Thu, 08 Sep 2022 15:00:03 +0000
