🔥 Answer:
It’s great you’re thinking about your retirement years. While it’s true that you could have benefited more by starting to invest earlier, it’s much better to start later than never. but investing later is much better than not investing at all. So, congratulations, there’s still time to make investment money! Let’s not waste another minute.
Investing is how most millionaires got rich. The investment market provides a long history of making people very well-to-do. For example, here’s a 5-year graph of the S&P500. Almost 100% ROI (Return On Investment) in 5 years? I’ll take it!
There are two basic types of investing:
- retirement accounts, and
- everything else.
Retirement accounts are usually your easiest way to start investing because many employers offer them to their employees. Automated payroll deductions make investing easy! Talk to your company’s human resources or accounting department if you’re unsure what your employer offers. Investing between 10% and 20% of your paycheck is standard.
In the United States, retirement accounts like the 401(k) and Roth IRA are designed for long-term growth and incur penalties if you withdraw your money too soon… before your 60s. There are legal loopholes allowing access to your money earlier, but don’t plan on using them. Stay invested and let your balance grow.
Other countries provide similar retirement options; for example, Canada’s Registered Retirement Savings Plans.
Once your retirement accounts are maximally funded, there are other options to learn about.
Most people know a little about the stock market. But, the secret “easy peasy” sauce is made of ETFs (Exchange Traded Funds; such as the S&P500 [the Vanguard S&P 500 ETF (NYSE: VOO) and the Fidelity S&P 500 Index Fund (MUTF: FXAIX)]); there are also REITs (Real Estate Investment Trusts; real estate investing without the hassles of being a landlord).
To start… open a brokerage account at Vanguard.com or Fidelity.com, speak with an advisor * (see below), and buy an asset. Compare investment fees… as they can quickly add up. ETFs, index funds, and stocks usually have the lowest fees... whereas mutual funds usually have the highest.
Automation makes continued growth easy. Set up a monthly automated bank transfer from your checking account to your Vanguard or Fidelity investment account. Done! Now… wait.
There is always risk with investing. Sometimes the market goes down, and thus you can lose money. But over time… the market has shown it prefers consistent growth!
Passivity beats activity. Why waste time studying companies and going through the rigmarole of buying and selling individual stocks? Day trading is not for beginners. So… buy index funds and ETFs and let them do what they are intended to do… grow. And… with your money thusly invested, it is already diversified.
So yes! Get your retirement accounts fully funded as soon as possible, then open a brokerage account for more investment options. And… watch your $$$ GROW!
* Q: “Do I need a financial advisor?”
A: For most people, the answer is NO!
Who NEEDS a financial advisor?
- Rich people who need help organizing and staying up to date on how to approach taxes, investments, etc.
- They with complicated financial situations (multiple trusts, real estate, and complex inheritances such as large diversified family estates).
- You won’t do the things you know you should (invest, save for retirement, etc.), for whatever reason, and thus you need help.
If you do need a financial advisor… a fiduciary… is bound by law to make all decisions in your best interest; make sure you get this extra layer of protection and professionalism.
Why don’t most people need a financial advisor?
You can manage your finances yourself. Think of it as anything else you must learn; it has its own vernacular, and the more energy you invest in learning, the more confident you will feel about it all. And the more your money grows, the more enjoyable it will be.
Just begin with the basics! You have more than a 50% chance of doing better at investing than financial managers.
“The latest report shows that only 47% of actively managed funds outperformed their passive counterparts during the 12-month period ending in June, and the success rate for actively managed growth funds was particularly bad.” {https://www.morningstar.com/funds/how-find-actively-managed-funds-that-outperform]
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