Let’s Talk about Money

Investing our money in the stock market might be one of the best ideas that could provide us with a secure income for long-term goals. Proper investing is the key to a financially secure future. Today, more than ever, we need to take that step and invest our money in the most rational way possible for the long term.

However, finding the best investment strategy can be a daunting task. However, we should not give up on the goals we have. There are enough proven ideas for proper investing, even for people who are not that experienced in the investing world yet.

Remember that each of us has a unique financial situation. The best way to invest depends on your personal preferences as well as your current and future financial situation. Today, we’ll present a few steps that will guide you to the right sequence and investment choice according to Nerdwallet.

Here’s a five-step process that can help you figure out how to invest your money now:

#1. Determine your financial goal and when you want to reach it.

#2. Decide if you want to manage your money yourself or work with a service to do it for you.

#3. Choose the type of investment account you will use.

#4. Open an account.

#5. Choose your investments.

Although at first glance the steps seem familiar to everyone, the truth is that you need to approach each one with special care when you perform each one.

Step #1. Set a goal for your money

Choosing how you will invest your money starts with determining your investment goals, when you need or want to achieve them, and how prepared you are for the risk you are taking. That’s because every investment carries its own risk.

Long-term goals: Goals that are in a time range of more than 5 years. One common such goal is retirement, but you may have others such as a down payment for a house or for college tuition. If so, you need to take a look and become well acquainted with the specifics of investing for long-term goals.

Short-term goals: Goals that are no more than 5 years away. For example, a vacation abroad next summer, etc. However, according to many investment professionals, money for short-term goals should not be invested. If you need the money you have saved in less than five years, then it is a good idea to know the specifics of investing for short-term goals.

Today, in this article, we will look at investing for the long term. How do you invest without a clear goal? And do such investments carry more risks? How close are they to a successful investment?

Step #2. Will you do it alone?

Once you’re clear on your goals, you can tackle the specific questions about how to invest (from choosing an account type to the best place to open an account to selecting investment vehicles). This is where you need to ask yourself “Will I be able to do this on my own?”.

Today, seeking professional help is much easier than it was a few years ago, thanks to the advent of automated portfolio management services, also known as robo-advisors.

These online advisors use computer algorithms and sophisticated software to build and manage a client’s investment portfolio, offering everything from automatic rebalancing to tax optimization and even access to human help when you need it.

Step #3. Choose an investment account

When buying most types of investments, including stocks and bonds, you need an investment account. Just as there are a number of bank accounts for different purposes – checking, savings, money market, certificates of deposit – there are several investment accounts you should know about.

Some accounts offer tax advantages if you invest for a specific purpose, such as retirement. Here, you need to consider the possibility of being taxed or penalized if you withdraw your money early or for a reason that is not considered qualified by plan rules.
Other accounts are general purpose and should be used for nonretirement purposes, such as buying a house.

Step #4. Open your account

Online Broker: This option allows you to take control of your account, managing it yourself by buying and selling various investments such as stocks, bonds, funds, and more complex financial instruments. Opting for an online broker is ideal for investors seeking a wide array of investment options or those who prefer to actively manage their accounts.

Robo-Advisor: This involves partnering with a portfolio management company that utilizes computer algorithms to handle the majority of tasks for you. They construct and oversee a portfolio tailored to your risk tolerance and financial objectives. Typically, you’ll pay an annual management fee, usually ranging from 0.25% to 0.50%. Robo-advisors primarily utilize funds, making them less suitable for those interested in individual stocks or bonds. However, they’re perfect for investors who prefer a hands-off approach.

Step #5. Select Investments Aligned with Your Risk Tolerance

Deciding where to invest money hinges on determining your risk tolerance. Your choice will be influenced by your financial objectives and your comfort level with assuming greater risk for the possibility of increased investment returns.

Typical investment options comprise: Stocks, Bonds, Mutual Funds, Real Estate.