Many worry about investing. The industry has worked hard to make the tools accessible to the masses, but starting can be difficult. However, starting is worth it because investing is one of the best ways to build wealth. Are you on the fence about investing? Here are some reasons to start now:
You benefit from compound interest
Compound interest is a good reason to start early. Compound interest is earnings on earnings. It’s how money grows for you. Longer compound interest growth increases your nest egg.
You may have heard that “time in the market beats timing the market.” This acknowledges that compound work works over time. Time and consistency are essential for long-term investing. Buying it and sticking to it will pay off.
Starting is simpler than ever
Long-term wealth building is best done through investing. Your capital can work for you by investing. Investing used to require a large sum. However, technology and online brokers make investing easy for most people.
Most online brokerages allow $25 investments. Ally Invest doesn’t require an opening deposit. Open a brokerage account and fund it later.
Even easier with partial shares
Today, you don’t have to worry about share prices or how many to buy. Just enter the dollar amount you want to invest, and the brokerage will calculate and execute the trade for you by giving you fractional shares.
Say you want to buy a $300 stock or ETF. Invest $300 to buy one share. Previously, you could only buy whole shares for $150. Partial shares allow you to own 0.5 shares. This makes buying in small amounts easier than ever.
Account opening is easy
Brokerage accounts are easy to open. Provide the following information to do it online:
This takes five minutes. Very simple. To make investing easier, link your brokerage account to a bank account after opening it. Linking bank accounts requires your routing number and account number. Some allow you to link accounts by logging into your bank, making it easier.
Indexes and ETFs simplify investing
Too many options make investing difficult for many. They worry about picking stocks and doing it “wrong.” But things have changed in recent decades.
Index funds helped investors make better decisions and start investing without picking the right stock. Index funds hold similar securities. Starting with an all-market index fund is simple. They track the performance of all US stock exchange-listed companies.
There are many index funds
Some funds focus on dividend stocks or indexes like the S&P 500. Sector-specific ETFs are available for those who want to bet on specific market sectors. Index ETFs can be traded like stocks for ease and low cost.
Starting with indexing can help you build your portfolio without much expertise. You’re also less dependent on one company’s fortunes, reducing risk.
Possibly Already Investing
Starting is hard, but you may already be investing without knowing it. You invest if you contribute to your company’s retirement plan. What you invest in your plan, usually funds, helps you build wealth. Using a qualified retirement plan also has tax benefits. Over time, tax-advantaged investing improves returns by using money more efficiently.
Check your 401(k) investments at work. A low-cost broker can help you open an IRA if your employer doesn’t offer one. Increase your investments as your finances improve. Your results will improve if you regularly add to your portfolio.
Set up an automatic bank withdrawal to your brokerage and a recurring investment order. This automated setup builds your portfolio over time. A little bit of consistent investing can create significant wealth.
Ready to jump? Things to consider
Start with investments you understand because all investments carry risk. Understand stocks before investing. Know how bonds work before buying one. Know what an index fund is before investing. Studying simpler investments takes a few minutes.
Many experts recommend starting with simpler investments. Index funds are popular because they are simple, cheap, and diverse. Due to their low risk, novice investors like Treasury bonds. Dividend aristocrats are safer stocks for individual investors.
Consider funds first
Being a boring investor can boost your finances. Consider starting with funds instead of picking individual stocks. Consider ETFs and index funds. While you may eventually invest in individual stocks, starting with funds can help you diversify and reduce stress.
Your investment should match your long-term financial goals, regardless of where you start. It should help you reach your financial goals. You should also invest money you can lose while learning. Any investment can lose money, and there is no guaranteed way to make money. Stock and index fund prices are volatile, especially in the short term. However, taking a little risk increases your chances of success.
Set your monthly investment limit
Continuously buying more is the key to investing. Determine your monthly investment and invest consistently. Dollar cost averaging helps you succeed over time.
If you have money withheld from your paycheck and diverted to your retirement account or sign up for an automatic investing plan with your broker, invest a set amount each month and increase it if you get lucky and get a raise.
Stock noise can be difficult to ignore. The stock market seems to gain or lose a lot every day.
Eventually, stock market performance smooths out. Remember that you’re in this for the long haul, and don’t worry about daily changes.
Getting started is best. Don’t delay it daily. Instead, force yourself to start. Funding opportunities and the fact that almost anyone can open an account make investing possible. Start early to extend compound interest.
Only by starting can you achieve long-term wealth. Don’t delay—setting up an account and making your first investment is almost easy today.