Whether it is social distanced boredom leading people to chase thrills or the next tulip mania, investing is having a pop culture moment. The advent of Robinhood, a free trading platform, has introduced the gamification of stock trading into our national consciousness. This has never been evident than this winter’s Gamestop phenomenon that left some investors retire early and others losing thousands, if not millions, of dollars. This event has left many people with the mistaken impression that investing has to be complicated and time consuming. Luckily with modern technology, investing has never been easier.
- Clearly define your goals. What and when are you saving for? Most American investors are saving with retirement as their goal. If that’s the case for you be sure to understand the benefits of tax advantaged retirement accounts like 401ks and IRAs. If you plan to invest outside of these accounts, familiarize yourself with how gains are taxed.
- Start as early as possible. The best tool available to young investors is compound interest – that is investment gains from one period earning interest on themselves in subsequent years. If you started to save $100 a month at age 25 it would be worth around $230,000 at retirement. If you waited until 35, despite investing just $12,000 less, your investment would only be worth $95,000.
- Understand the financial products that make investing simple. You don’t have to go out and choose individual stocks to purchase. Products like mutual funds and index funds allow you to pool money with thousands of other investors to purchase hundreds or thousands of different stocks or bonds to take advantage of the market as a whole and avoid losing money on any single stock. Though the market has historically gone up over time, it does sometimes lose value in dramatic fashion.
- If this all seems a bit overwhelming a very simple option is a target date fund. These are funds of many other funds tied to a specific date, usually when you’d like to retire, that automatically adjust as your goal date approaches.
-Graduate and Professional Student, Scarlet and Gray Financial