How to start investing for the long-term
Learn about the investment options available to you that make the most sense for your long-term financial success.
Investing can help your money grow. But before you move your money to anything riskier than a savings account or IRA, you should review the ways you can do so.
Making well-advised investments comes down to cultivating the right mindset and getting educated about the options available to you. Investing can be a means to secure your long-term financial health, but you should also consider the risks attached to each investment option, and how these relate to your own willingness to take on risk. Framing investment risk against your own long-term priorities can help you decide what investment vehicles will be best.
Follow these key steps to hone your investing strategy.
Choose investment priorities
Ask yourself why you want to invest: Is it to prepare for retirement, buy a home, or start a new business? How much money will you need for your goals? Then, organize your investment priorities by the amount of time needed to achieve them. Writing them down can help you think clearly about which goals you have, and which you need to start with.
Your investment priorities should also be informed by your particular financial situation. You should invest no more than you can afford to lose. That way, you won’t jeopardize your short-term financial health as you work toward achieving more long-term aims.
Invest in your company’s employer-sponsored retirement plan
It’s never too early to start investing in your retirement. Take advantage of your employer’s plan, if they offer one. Set aside as much money as your employer is willing to match.
Employer-sponsored retirement plans can take many forms, such as a 401(k), 403(b), or 457(b). Some people choose to manage their own investment portfolio by investing in a mixture of stocks and bonds. A portfolio with more stocks than bonds is considered higher risk, along with a potential for high returns on investment, while a portfolio with more bonds than stocks will be the opposite. If you choose to manage your own retirement portfolio, think about which balance makes the most sense for you.
That balance could also shift over time depending on your risk tolerance as you get older. For example, as you near retirement, investing in less risky bonds rather than stocks could be a better approach. Generally, you can afford to take on more risk earlier in your career because you have time to adjust if the market takes a downturn before you withdraw the money. Once you’re closer to retirement, you’ll want to take on less risk to help ensure your retirement funds are more secure when you need them.
Work with a financial planner
Everyone prefers a different level of autonomy when it comes to investing. While those who want to retain complete control can pursue a self-directed investment strategy, many find it helpful to seek outside advice. You can get started by visiting the Hands on Banking® website to get an understanding of the basics of investing and retirement, like how social security works, or what the difference is between stocks and bonds.
Another option to consider for guidance is robo-advisors. These online platforms provide an automated investment service, some of which with access to human financial advice. You can also seek the advice of a Certified Financial PlannerTM (CFP®) to build a unique plan that works best for you. A CFP can help you manage your goals and simplify the complex world of investing. To find a CFP in your area, visit the Financial Planning Association’s national database. See if there are free resources available to you locally as well.
As you plan to invest, keep your personal financial goals in mind and be ready to adjust your plan as your situation changes. When you prepare, investments can be a great way to help you reach financial goals.
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