Investing Your Money- Part 2

Earlier this week, I discussed the basics of investing and how to know whether or not you’re ready to invest.  Once you’re ready to start investing, the next question is how to create an investment plan and where to go to do so.
Creating a Plan:
The next step that occurs before investing is creating an overall plan of what you are trying to accomplish.  Set financial goals and determine how much time you have to reach them.  Part of this step is to take your tolerance for risk into account. Next you would decide how much money you need to invest every month, and the risk of investments you need.
Where to go to Invest:
After considering these factors, the next step is to decide where to go to actually start investing.  There are many ways to do this, but for now I will discuss three of the most common ways to invest:
  • Employer: If retirement planning is a main financial goal, this is a great place to start.  Many employers match part of your contribution to a 401(k), or other type of retirement plan.  This is free money and should always be taken advantage of, even if it means more of your paycheck is deducted for your retirement investments.  If you currently don’t have a job that offers this, consider looking into employers that do.
  • Online Trading: This investment tool is useful for those wanting to invest in the stock market who feel comfortable enough doing so without an investment adviser.  It is advised that only those who are well-educated about the stock market trade online.  The benefit of trading stocks this way is that there is no fee toward paying a stockbroker; however, other online fees may apply.
  • Professional Stockbroker: It may be beneficial to work with a professional who has knowledge and experience in investing in the stock market. Although it is impossible even for a professional to predict stock market changes, they have studied the market and are trained to advise customers based on their goals, philosophy, and risk tolerance.  The extra fee that goes toward a professional pays for both their knowledge as well as help with portfolio management.
Finally, it’s worth mentioning that one of the most important pieces of advice you’ll ever hear about investing is to start as early as possible.  The earlier you start, the easier it is to achieve financial goals.  There are two main reasons for this: 1) Compound interest accumulates more over a longer period of time and 2) Investment risk is evened out over a longer period of time.
Investing may seem big, scary and something you want to put off until age 35, but it’s not as daunting as you may think and it is necessary to meet financial goals. Finally, if you have any questions about investing, please come talk to us at the Student Money Management Center.  We can’t give you specific advice about what securities to invest in, but we can help guide and prepare you through this important aspect of your finances.
Post written by Amanda Owens, SMMC Program Assistant
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