If you’ve been spending time and effort building your savings up, then you might be wondering when it’s time to start investing. Investing your savings can be an ideal way to achieve financial freedom in the future and get further towards your financial goals. But the tricky part is figuring out how much to invest, and what to invest in. Chances are that you have a lot of questions about investing as a newcomer. Some top tips to keep in mind include:
Start as Early as Possible
Investing your savings as early as possible is one of the best ways to start seeing solid returns on your money. Over time you will get compound earnings, meaning that your investment returns will eventually start making returns of their own. With compound earnings, your account balance can grow over time, so the earlier you start, the better. The best part is that you can get started without a huge amount of savings, as there are now more options than ever before available that only require a small minimum investment or no minimum at all.
Determine How Much to Invest
How much you should invest will depend on several factors including your financial situation, your investment goals, and when you want to reach these goals. Retirement is a common investment goal for a lot of people today. If you are investing for retirement, then as a general rule you should look to invest ten to fifteen percent of your income each year. While that might not always sound realistic for some people who are just starting out, it’s always best to start small as early as you can and work your way up to this over time.
Choose an Investment Strategy
There are various investment strategies available to choose from, and the best one for you will depend on your savings goals, how much money you are going to need to reach your goals, and how much time you have. If you have a lot of time, for example, if you are saving for retirement, then you might be interested in stocks, such as these dividend stocks all offering dividends of 3% or higher. On the other hand, if you are investing in the short-term and want to reach your goals faster, a lower-risk investment portfolio or a high-interest savings account might be a better choice.
Open an Investment Account
If you are investing for retirement and do not have access to a retirement account that is sponsored by your employer, then you have a few options to consider, such as an individual retirement account (IRA) or a Roth IRA. On the other hand, if your investment goals are not based around retirement, then these accounts are best avoided as they are designed for these purposes and have restrictions on where and how you can access your money. A good option for non-retirement investments would be a taxable brokerage account that you are able to withdraw from at any time.
Understand Your Investment Options
Once you have decided how you are going to invest, it’s time to think about your options when it comes to what you are investing in. Each investment option available carries some risk, and it’s important to understand the instruments, the risk levels that they carry and whether or not that is aligned with your own goals. Spend some time learning more about some of the most popular investment types such as stocks, bonds, mutual funds, and exchange-traded funds to figure out the best option for you.
If you’re building up your savings and want to grow them further with investing, keep this guide in mind to help you make the right investment decisions.
