If you are looking to start investing in stocks, reday to fund your smart retirement, follow this 4-step checklist to help you get going:
– Decide how you would like to invest
– Set up an investment account
– Decide what you would like to invest in
– Determine how much you can actually invest – then buy
- Decide How You Would Like to Invest
Today, you have several investment options, so you can really match your style of investing to your level of knowledge and the amount of energy and time that you would like to spend investing. Spend as much or as little time as you want on investing.
The first major decision point is: How will your money be managed?
– A Human Professional: It is a great choice for those looking to spend just a few minutes each year worrying about investing. It is also an excellent option for those that have limited investing knowledge.
– Robo-Advisor: A robo-advisor is another decent option that involves using an automated program to manage your money using a similar decision process to a human advisor, but at much lower cost. You can quickly set up an investment plan and then al you will have to do is deposit funds and the robo-advisor will handle the rest.
– Self-Managed: It is perhaps the ideal choice for those with greater investing knowledge or those that can devote time to making investment decisions. If you would like to select your own funds or stocks, you will require a brokerage account.
Your choice here will determine what kind of account you open in the next step.
- Set Up an Investment Account
What account options are available?
If you want your money to be managed by a professional:
A human advisor will help you build a stock portfolio and can even help you with other wealth-planning moves (e.g. planning for college expenses). Human advisors usually charge about 1% of your assets annually, with a high investment minimum. The greatest advantage with using a human advisor is that it can help you stick to your financial plan.
A robo-advisor, on the other hand, will design a stock portfolio that matches your risk tolerance and time horizon. They are generally cheaper than human advisors, often a quarter of the price or less. Furthermore, many offer planning services to help you maximize your wealth.
You can check online reviews of the major robo-advisors to help you find the one that most closely meets your requirements.
If you prefer to manage your own money:
With an online broker, you can buy stock and many other kinds of investments, including mutual funds, exchange-traded funds (ETFs), bonds, options, and more. The best brokers have no-fee commissions on stocks along with lots of education and research at no extra cost, to help you quickly power up your game.
You can check reviews of the best brokers for beginners to choose the right one for your needs. You will find various reputable websites that provide in-depth reviews of the major online brokers so that you can find one that meets your exact needs.
If you decide to use an online brokerage or a robo-advisor, you can set up your account in a matter of minutes and get started with investing. If you decide to use a human advisor instead, you will have to first interview some candidates to find out which one works best for your needs and keep you on track.
- Decide What You Would Like to Invest in
Figuring out what you would like to invest in is the next major step. It can be a particularly daunting step for many beginners, but if you have opted for a human advisor or a robo-advisor, it definitely won’t be easy.
Using an Advisor
If you are using an advisor, whether human or robo, you will not have to decide what to invest in. This is part of the value that these services offer.
For instance, when you open a robo-advisor, you will typically answer questions about your risk tolerance and when you need the money. The robo-advisor will then create your portfolio and choose the funds to invest in. All you will have to do is fund the account, and it will be the robo-advisor’s responsibility to create your portfolio. Visit Vector Vest to learn more about how does a recession affect the stock market and to see more investment guides.
Using a Brokerage
If you are using a brokerage, you will need to select every investment and make the trading decisions yourself. You have the option of investing in individual stocks, stock funds, or various other assets. The best brokers offer free research to help with this process and offer plenty of resources aimed at aiding beginners.
If you are managing your own portfolio, you can also choose to invest either actively or passively. The main difference between the two is that you choose how long you would like to invest. Passive investors usually take a long-term perspective, but active investors are more frequent traders. Research shows that the performance of passive investors is much better than that of active investors.
- Determine How Much You Can Actually Invest – then Buy
The key to building wealth is adding money to your account over time and letting the power of compounding work its magic. This means you should set aside funds for investing regularly into your weekly or monthly plan. Fortunately, it is incredibly simple to get started.
How Much Do I Invest?
The amount of money you should invest will depend entirely on your budget and time frame. While you can invest whatever you are comfortably able to afford, experts recommend leaving the money invested for at least 3 years, and ideally 5 or more, to ride out bumps in the market.
If you are unable to commit to keeping your money invested for a period of at least 3 years without touching it, you should consider building an emergency fund. Many choose to retire abroad so need to have money aside for living costs and international health insurance since they are not covered by the NHS. The emergency fund will ensure that you don’t get out of an investment early, letting you to ride out fluctuations in the value of your stocks.
How Much Do I Need to Get Started?
Major online brokerages today don’t have an account minimum (or the account minimum is extremely low), which means that you can get started with very little money. Furthermore, many brokers allow you to purchase fractional shares of stocks and ETFs. If you are unable to buy a full share, it is still possible to buy a portion of a share, which means that you can get started with just about any amount.
It is just as easy with robo-advisors. Few have an account minimum and all you will be required to do is deposit the funds and the robo advisor will handle everything else. Set up an auto-deposit to the robo-advisor account and you will only have to think about investing once each year, when it is time to do your taxes.