So, You Want to Start Investing

Today we have a guest post from my good friend Kayla, who shares tips on personal finance management and side hustling over at kaylasloan.com. Enjoy!

So, you want to start investing…but you aren’t sure where to start? I totally understand! I too am just starting to dip my toes into the world of investing now that my high interest debt is paid off.

There are so many options available to choose from. While that’s a good thing, because there’s options of everyone’s different situations and preferences, it can also make investing that much more confusing. Each option has different benefits and drawbacks. So, if you want to start investing, here’s an overview of a few basic investing options you may want to consider.

1. Employer-Sponsored 401K Plans

Unless you are self-employed, you may be able to take advantage of a 401K plan through your employer. They are a great way to learn about investing if you are new to it. Many employers offer them, and if your does, you should utilize this benefit to your advantage.

Recommended Reading: The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition) (Collins Business Essentials)

How it works is you determine a percentage of each of your paychecks to be contributed toward this investment plan. The money is withheld before taxes and deposited into an investment account in your name. Then, your employer will usually match a certain percentage of your contributions to further increase your investment dollars. There are several funds to choose from, each with different levels of risk. By choosing some funds with higher risk, some with medium risk, and some with low risk you can reduce your chances of losing on your investments. Like most retirement investment options, there are rules about withdrawing funds, so find these out to avoid paying any penalties.

You could also choose to set up a Roth 401K through your employer if they offer that as well to take advantage of investing after-tax dollars. Sometimes a mix of both before-tax and after-tax dollars being invested is best. Consult an expert if you’re not sure which is best for your situation.

2. Robo-advisors

Robo-advisors, such as Wealthfront, are another great choice for the new investor. They offer low minimum deposits so you can begin investing sooner rather than later after saving up thousands. In addition, the fees charged for their services are low, making them an ideal choice when you don’t have a lot saved up to start an investment account.

Recommended Reading: The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns

Investing takes work. However, robo-advisors use auto-rebalancing to take some of the work out of investing. This means you don’t have to figure out what changes to make along the way because they do it for you. They also offer a risk-assessment test you can take to help choose an investment plan and funds that are best for your level of comfort with risk and based on your investment goals, like when you’ll need to use the funds you are investing. By automating the process, they save you time and money in your investments.

But don’t worry, you still have practically instant access to check your investments with the touch of a few buttons. Many of the robo-advisors available use apps for your convenience. In other words, you don’t have to wait for a human to get back to you when their schedule allows it. Instead, you can check your investment whenever you want, making it ideal for all investors, new and experienced alike.

3. REIT’s

Real estate investing is another way you can build wealth, even as a new investor. When you don’t have a lot of money to get started with, crowdfunding may be an option for you to consider. Crowdfunding pools your money with that of other investors so you can all share in the profits of the investment gains. This is done through Real Estate Investment Trusts, or REIT’s, and all over the internet.

REIT’s allow investors to have steady income and still diversify their investments. They are run by a management team of real estate experts who develop strategies for how to best invest your money. Because your money is pooled with that of others, they can choose investments not normally available to you as a single investor. They usually divide the investments over more than one property to reduce the risk of loss and increase potential gains. There are several companies to choose from that offer REIT’s over the internet. Check each out to find out what their minimum deposit requirements are and fees for their services.

Other Expert-Recommended Books on Investing:

The Essays of Warren Buffett: Lessons for Corporate America, Fourth Edition

Value Investing: From Graham to Buffett and Beyond

Stocks for the Long Run 5/E: The Definitive Guide to Financial Market Returns & Long-Term Investment Strategies (Management & Leadership)

Dividends Still Don’t Lie: The Truth About Investing in Blue Chip Stocks and Winning in the Stock Market

So, when you want to start investing but you aren’t sure where to start, check out one of the above options. One of them just might be the answer you are looking for.

Have you started investing? What did you choose to do as a new investor?

Kayla is a mid-20s single girl living in the Midwest, USA. She is focused on paying off her consumer and student loans, while simplifying her life and closet. You can join her on her journey at kaylasloan.com or follow her on Twitter @kaylarsloan.

8 comments

  1. Good question! We’re still getting out of debt, but we do contribute to a Roth IRA and a 401k. We won’t be able to touch this money until we’re well past our early retirement age, so we’ll need to start doing heavy investing to build our passive income during early retirement. I’m leaning towards Vanguard funds.

    • Kayla says:

      I haven’t done too much investing yet either, but plan to ramp it up now that I only have low-interest debt left to pay off. I’ve heard really good things about Vanguard.

  2. Yes, we’re heavily invested. When first getting started it was mainly through work-sponsored retirement plans. After that I spent years self-managing an account at Fidelity. Now we just let Betterment do all the work for us. 🙂

  3. Yes, we invest in our 401k, IRAs, and HSA. We started in our mid-20s with the 401k at my husband’s job – we contributed the minimum to get the company match for several years, and it was one of the best things we’ve ever done. One important thing here – at first, we had no idea exactly what to invest the $$ in (I think that’s the scary part for so many people). We weren’t experts, but did the best we could with the knowledge we had, looked through our options – and nothing bad happened. Maybe we didn’t have the optimal investments for a few years, but just the fact that we were investing regularly made a huge difference.

  4. I have a house and now just added a 2nd one! I’m going to rent out my first place and look to get about $500 a month in passive income.

    I’m getting the 4% company match in my 401k, and maxing an IRA, but don’t want to get into the stock market too much because I think it’s a casino!

    Thanks for sharing Kayla

  5. For us, our main “investment” has been my good old-fashioned pension plan. Dumb luck was a very good thing for us to have when we were dumb : ) Now, our focus is upon getting our mortgage paid off (under 2 years to go) while we save/invest in TFSAs. Eventually, we’ll be in a position to up our investing game. Good thing it happens gradually. Congratulations on your own progress, Kayla. How wonderful that your high interest (consumer?) debt is gone!

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