One of the most common questions that I get is…How do I start investing? The topic of investing can be overwhelming. Why? Because we’re afraid. Afraid of the unknown. Afraid of what we don’t know. And let’s be real…Afraid of losing money.
Is there risk involved in investing? Absolutely! Will there be ups and downs when investing? Absolutely! But there is an even greater risk in doing nothing.
There is this pesky little thing called inflation that we need to be familiar with. Intimately familiar with. Inflation is the rate at which prices for the things that we buy rise, while the buying power of our money falls.
In other words…A $1.00 today is NOT equivalent to $1.00 in 5 years. In actuality, the dollar that you are holding onto so tightly today will only be worth .97 cents next year. And in 5 years your $1.00 will be worth .85 cents.
Inflation is like a silent thief that chips away at your money as each day passes. Ever notice how the cost of everything, like gas, milk, postage stamps rises seemingly overnight? When you experience that feeling, you are literally experiencing the effects of inflation.
The only way to fight inflation is with investing. Investing allows your money to grow and outpace inflation. We can’t afford not to invest.
Here are a few tips to start investing:
- Start with your employer-based retirement account. Not sexy, but it works. If you are based in the US investing pre-tax dollars into a 401k, 403b, or TSP is a great way to grow your money while saving on taxes today.
- Invest consistently and regularly regardless of what the market is doing. I know it’s hard but try not to get too caught up emotionally with all of the market changes. Instead, put your investments on auto-pilot and stop watching it!
- Avoid companies with high fees that will eat into your profits. Fidelity, Schwab, and Vanguard are companies that have the lowest fees for investors.
- Contribute to a Roth IRA annually. The money that you put into a Roth grows tax-free and will later be withdrawn tax-free.
- Open a taxable brokerage account and invest in index funds. Personally, I don’t bother with individual stocks or mutual funds that carry high fees. The best part about index funds is that they are easy to manage especially if you don’t know much about investing.
And please remember that you can get started with investing no matter where you are on your financial journey. Yes, you can still invest while paying off debt!
Hardcore Dave Ramsey fans please don’t come for me!
As 2019 approaches, take a few moments to think about your money goals.
Are you interested in getting started with investing?