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Investing 101: Simple Tips to Start Investing Your Money

The world of investing can seem pretty complicated to an outsider. If you’re curious about investing, don’t be daunted by the myriad of terms. The basics are actually pretty easy to learn, and you can pick up more as you go. Capital markets are accessible to individual investors too, so you can invest almost anywhere. Here are 4 tips to help you learn the basics of investing.

 

 · 1. Decide How Much You Want to Invest

 

How much can you afford to invest? Many people have a set dollar amount or percentage of their income they can commit to investing each month. This doesn’t have to be anything exorbitant. If you can only afford five dollars every paycheck, that’s okay. It’s better if you can invest $50 or $100 every month, but even just $5 is better than nothing. You don’t want to put too much strain on your budget for other expenses, so choose what you can afford. So long as you can keep to that amount, every paycheck or month, the total amount you’ve invested will grow over time.

 

 · 2. Get Advice or Self-Direct

 

When investing, you can either pay to receive professional investment advice, or you can self-direct your accounts. The route you choose will depend on how willing you are to do the research needed in order to make smart investment decisions. Some apps help walk you through investing, and while you’ll probably want to research what exactly you’re investing in, a self-directed account, in this case, would be the way to go. If you’d rather let someone else take charge of it, you’d want to find a financial advisor. Advisors do, however, charge fees that can cut into your returns.

 

 · 3. Set Up a Platform

 

Before you start investing, you’ll need to choose an investment platform, which is a service that facilitates investment activities. There are many of these online. You can usually get up and going with these services pretty quickly after providing some personal information and funding your account. Full-service investment platforms offer sophisticated suites of investment research and other tools. More bare-bones platforms provide a way to buy and sell investments but not much else. Different platforms aren’t necessarily better than others; it just depends on your needs.

 

 · 4. Determine Account Type

 

You’ll need to consider the time frame for which you are investing. If you don’t plan on withdrawing your investments until retirement, an individual retirement account (IRA) may be beneficial. In an IRA, you invest using pre-tax money, and you’re not taxed on the gains until you withdraw them. The catch is that you have to wait until age 59 ½ to withdraw without a penalty. If you plan on withdrawing from the account before retirement, you’ll want a non-IRA, or “non-qualified” account. Earnings aren’t tax-deferred in these accounts, but there’s no penalty for taking withdrawals before a certain age.

 

Investing doesn’t have to be complicated. Anyone can learn to invest. Follow the above five tips and you’ll be on your way to investing your money properly.

 

Sources
Internal Revenue Service
CNN Money
Weisblatt Law Firm
The Balance





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