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Start Investing
Strategies to get you started
There are so many important choices to make when you’re just beginning to invest for your future, but there are a number of things you can do to help you get started today!
Evaluate your Current Situation.
The first step to any successful investment plan is to get a handle on your current financial situation, and a good place to start is by preparing a personal budget. Once you get a handle on your expenses, try coming up with a figure that you could comfortably save and invest on a regular basis. Don’t worry if you don’t have a huge lump sum of money to start investing. In fact, you can open an account with as little as $50 a month, and it can be automatically deducted from your checking or savings account! The benefit to this strategy is that it keeps you on a systematic investment plan and over time you’ll be surprised how fast your nest egg can grow!
Make specific goals.
The next step is to determine what exactly you wish to accomplish. Are you saving for a comfortable and secure retirement? Is your main goal to put your children through college? You should also get a clear picture of your time frame, which is simply the number of years you’ve got to invest before you’ll actually use the money you’ve accumulated.
Open an account…but which one?
Now that you’ve decided how much you’re going to invest, the next step is to open an account. This isn’t as simple as it may seem because there are a number of choices and the tricky part is to weigh out the pros and cons of each option to determine which one is right for you. If you’re saving for retirement you may want to consider a Traditional IRA or a Roth IRA which provide significant tax advantages, but there are a number restrictions that you need to be aware of. Making the wrong decision at this stage can be costly, but I can help walk you through the various options and together we can make informed decisions based on your specific situation.
Now that you’re ready to invest, we need to make decisions about what specific investments are appropriate for you.
Determine what type of investor you are.
Every portfolio experiences some ups and downs, so it’s important to determine your tolerance for volatility in order to choose investments that you’re comfortable with. There’s always a tradeoff to make: if you’re after higher returns, chances are you’ll experience more fluctuations in your portfolio. What’s your tolerance for volatility?
Low: You are more concerned with getting consistent returns on your investment, even if those returns are a little bit lower.
Medium: You can handle some fluctuation in your account, but you’re not comfortable with wide swings in the market.
High: You can look past short-term market swings and you’ve got the stomach to stick to your long-term strategy despite any dips in your portfolio.
Diversify!
Asset allocation is the process of diversifying your portfolio to make sure you don’t put all of your money into one type of investment. A diversified portfolio often includes a mix of:
- Equity investments such as domestic and international stocks and stock mutual funds
These tend to fluctuate more than other investments but over time they’ve provided the highest returns.
- Fixed-income securities such as corporate, government, or municipal bonds
Fixed income investments generally fluctuate less than equity investments, but they’ve produced lower returns over the long-run.
- CDs and money markets.
These are the most stable investments since they offer guaranteed rates of return, but the return they do provide is generally low.
The right mix is critical because it doesn’t matter as much how one particular investment performs, but how all of your investments perform together.
There are so many issues to consider when you’re just getting started, but I can help! Please feel free to call me at (585) 512-2313 or e-mail me at KDowejko@SageRutty.com to set up an initial consultation, free of charge.
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