For many Americans, until recently the only financial goal is to stay afloat.
About 78% of Americans report that they make enough money each month to pay their bills. So how does one get off the hamster wheel? You start looking for other financial opportunities like investments.
Investing is not complicated. But I'm not going to echo that and tell you that by reading an article you'll be ready to buy your first stock -- although you could.
After the meteoric rise of GameStop stock , new investors were making enough money to pay off the debt.
Like most of the big financial decisions in your life, investing requires careful thought and taking some time to learn the basics before dipping your toe in the water.
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when talking to my peers who aren't in the market , one thing is coming: To whom should I turn for help?
Well, there are countless resources out there, but those resources are useless if people don't even know what to ask.
Dheeraj Kaur, Head of Chief Product at Robinhood, concurred. "People think the investment tools and resources are not made for them," she told USA Today.
Robinhood recently made its mark by creating market disruption driven by individual investors betting on stocks such as Gamestop, AMC and Blackberry. Like Acorns, Stash and Invstr, these investing apps are making the process more accessible to women, minorities and all individuals.
Such apps have created an entirely new generation of investors who have yet to develop a plan for their portfolio. But as the saying goes, you don't have to have the answer to everything, you just need to know someone who does.
has more to see than just the ocean
For new investors and those looking to get into the market alike, it would be in their best interest to sit down with a professional to set some goals. Here are some steps to set myself on a good investment path:
1. What should I look for in a financial planner or investment advisor?
Conducting an interview is important when choosing a financial advisor. This is the kind of person who will handle your money, so you shouldn't rely on just a fancy title or go with the first option.
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said Monica Sips, a Certified Financial Planner and Senior Wealth Advisor at Accentual Wealth Advisors.
"First, ask how investment decisions are made," she said. “Make sure you are comfortable with that – it could be an individual advisor (making those decisions), it could be at the firm level, it could be that they are outsourcing. And also ask whether the advisor or firm How is it compensated,” he added.
If you still don't feel like you've gotten enough from them, try the classic interview, "What else should I ask you?" The answer can give you a sense of the style, commitment and experience of the consultant.
"You also want to make sure that the advisor does not encourage you to sell certain products and that they are independent advisors," said Brian Walsh, senior financial advisor at Walsh & Nicholson Financial Group. "Fiduciaries are legally obligated to recommend only those investments and products that are in the best interests of the client."
He said that you should not rush to make a decision and you should do your research, interview several advisors and go with the one that feels right for you.
There are also resources for finding financial advisors if you are the first person to step into your family or friend circle. Recommends www.letsmakeaplan.org to find advisors in your area
2. What investment terms should I know?
It is also good to know about some of the investment terms before going through them. Here is a list of terms that financial advisors recommend you know:
Asset allocation: A strategy balances your risk tolerance and goals by dividing a portfolio's assets.
Fiduciary: A person or company that acts on your behalf.
Brokerage Account: An account with a brokerage firm licensed to trade on your behalf.
Retirement Account: An account to be accessed after retirement (or during an emergency, in some cases).
Investment vehicles: Products in which you invest, such as certificates of deposit, bonds, stocks, options, or futures.
ETF: An exchange-traded fund is a type of security made up of a collection of securities.
Mutual Fund: An investment vehicle composed of a pool of funds collected from multiple investors to invest in securities.
Registered Investment Advisor (RIA): An individual or firm that advises high-net-worth individuals on investments and their portfolios. Manages
Source: Investopedia. Com
3. How Much Money Should I Invest?
This is personal, as is the case with most investment decisions. However, there are some key points that have been proven to produce good results over time.
"At a minimum, you need to save 20% (of your income)," Sips said. "My more aggressive investors are probably saving closer to 40-50%."
If you're a beginner, reducing that amount is nerve-wracking. Investing apps like Robinhood and Acorns have the option of investing as little as $1 at a time with fractional shares, which is a great option for those who want to become familiar with the process. The amount of money you invest is ultimately what you decide - and it depends on your risk tolerance.
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I Did, such as short-term savings," said Walsh. “Make sure you are contributing to your employer retirement plan if one is offered, and take advantage of the match if available. From there, it will depend on how much net cash flow you have left over each month. and what are your goals."
4. How many stocks should I have?
Before stocking up, investors would be wise to consider the investment vehicle and account they are using because those details can play a role in the number of stocks needed for diversification.
Walsh said, "If you're investing in individual stocks, which I don't recommend unless the rest of your investment portfolio is built to reach your goals, no more than 20 stocks should be enough. " More than 20 stocks in a portfolio doesn't necessarily lead to better overall risk diversification. We build portfolios using low-cost funds and ETFs and we typically have seven to 10 funds in a given portfolio.Read More There's no need to keep more than that."
Sips, on the other hand, believes that 35 to 50 stocks can make up a diversified portfolio. "Picking individual stocks can be difficult, so for many times investors, I recommend index funds, like ETFs or something like that."
Once again, this highlights the importance of sitting down with a financial planner, who takes into account your situation and goals.
To that end, Sips reminds us that consistency trumps amount. "It's important to set a plan and stick to it. And that's where we see customers have a ton of success," she said.
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5. When does my portfolio start making money?
Show me the money, am I right? The scariest part of investing is the risk and control. And like all learning processes, positive reinforcement works best—especially if that reinforcement is money.
"Hopefully, your portfolio will start making money right away," Walsh said.
"When you invest, you need to make sure you have a long-term outlook. No one can time the markets," he said. “You can start investing and the next day the market falls 10% or rises 10%, there is no way to tell.”
6. How does the investment affect my taxes?
The investment may or may not have any impact on your taxes.
"Investing in a retirement account, such as a 401(k) or IRA, will not have (as much) impact for tax-deferred accounts," Sips said. "While a $10,000 investment in Tesla turned into $70,000 last year and was sold in less than 12 months could have a cascading effect on short-term gains taxes."
But fear not, managing capital gains taxes usually depends on how much and when you withdraw from your account.
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YouGains are taxed at either a 15% or 20% capital gains tax rate, depending on your tax bracket," Walsh explained. "If you hold office for less than one year, your gains are taxed as ordinary income."
Everyone's investing journey is different, but we all begin with the decision to make our money work for us. The whole process can be as complicated as you want. For new and seasoned investors, only one thing remains the same: it's a risk.
Look for reliable help and don't be afraid. We are all "markets" in a sense so we all have equal opportunities to move up or down.
Josh Rivera is the editor of Money and Consumer Now at USA Today.
This column should not be considered financial advice. Contact a professional financial planner to determine if the investment is right for you and how it fits into your personal finance goals. The views and opinions expressed in this column are those of the author and do not necessarily reflect the views of USA TODAY.
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