Essential Investing Tips for Beginners
We’ve said it a thousand times before, and we’ll say it again- investing is the best way to increase your earnings and maximize your wealth. According to the Pew Research Center, over 50% of US-based households have some sort of stake in the stock market. While a mere 14% of US families invest directly in individual stocks, the research center claims that retirement accounts enable 52% of the population to participate in the market.
If you’re a beginner looking to gain some wisdom before jumping in, the following tips will surely serve you well.
1. Get Maximum Use Out of Retirement Accounts
We’re starting off with this because we bet you’re wondering why 52% of Americans are so satisfied with and habitual of investing in retirement accounts. The answer is simple- it’s low-hanging fruit. Most workplaces offer a retirement plan, such as the 401(k).
If yours does, be sure to reap as much benefit as possible from it. Ideally, you should be redirecting 15-20% of your annual gross income towards your retirement account. Whatever you do, make sure that you’re contributing enough to meet your employer’s match; otherwise, that’s just money you’re letting slip through your fingers. Moreover, you should opt for target-date funds, which would automatically lower the risk of your investments as you approach your retirement age.
While the 401(k) generally is considered the easiest means of investing, some people are not gifted with that luxury. If you’re in a similar dilemma, consider opening a Roth or traditional IRA account to help back you up in terms of future savings.
2. Achieve Financial Stability Before Investing
People often make the mistake of entering the market to stabilize an already crippling financial situation. Always remember the risk attached to investing. What you put into the market should always be money that you can risk losing. Before getting started, here is a guideline you should consult:
– What are your financial goals? There’s always a reason that brings people to the investment world- what’s yours? What are you hoping to get out of the market? Are you trying to put some extra money away or saving up for retirement age? Whatever the case, outline your goals and what you seek to achieve during your time in the market before entering it. This will help guide you through and through.
– What’s your cash flow like? For an investment to work and reap results, you need to be consistent. Therefore, determine how much cash you have coming in every month and how much you can reroute towards your investment plan.
– Do you have an emergency fund? If there’s anything the last year should have taught you, it’s that problems come unannounced. You never know when you might lose your job, be met with an unfortunate incident that requires a whole lot of money. To avoid pulling out of the market prematurely, ensure that you have a fund on the side for those rainy days.
3. Understand You’re Not An Expert
It takes a lot of time, patience, dedication, and studying to understand the market. Even seasoned investors make their fair share of mistakes due to the market’s volatility and unpredictability. There’s no way to ensure all wins and no losses. However, if you’re not comfortable doing it yourself, enlist the help of a funds manager, who will keep track of your assets for you and invest them wisely.
It will fare better for you to put in the effort and research required before jumping into the market. However, if your current financial situation is strained, remember that the market isn’t going anywhere. It will always be here for you to pool in your money- just be sure that you’re not pulling out the cash necessary for you or your family’s survival.
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