Have you ever thought about growing your wealth, but had no idea how to start? You’re not alone. Many of us, especially women, don’t feel ready to delve into a seemingly complicated and risky venture. However, studies “consistently confirm that women outperform men by a considerable margin when it comes to investing.”
What’s to stop you from being one of those women? Let’s start with the basics.
Investing allows you to purchase small shares of companies with the intent that the company’s value will increase. That’s where your money will grow. Your success is determined by how soon you’ll need the money, how risky you’re willing to be, and how actively you want to manage your investments. As with any new venture, preparation is key.
Before diving in let’s, keep some background information in mind:
Money habits are very important when deciding to invest. Before you choose where to get started, consider the amount of risk you’d like to take. If necessary, first work on a plan to manage your debt, then take a small amount of money continuously and put it away. From there, you can work on understanding and managing your risk.
Why is it important to know where you spend most and why? Because those are the kinds of investments you’ll chase, especially if you go it alone.
It might be tempting to start off with a seemingly popular or successful company, but experts warn not to lead with your emotions or trends. If you’re reading this, you’re likely a cautious person who wouldn’t blindly invest their next paycheck in Tesla. But it happens. Instead, do your research and learn from professionals and mentors when deciding where to invest. Look for a company with a good team and founder, whose mission solves big problems.
Additionally, make sure you have at least three months of cash at hand and begin with investing in lower volatility stocks, such as INDEX and ETF. Once you get a handle on the process, you can work on different categories of stocks, such as bond funds, or even, dare we say, real estate investing.
Are we ready to get started now?
There are two main ways to begin the process, depending on how hands on you’d like to be. A broker or a robo adviser will lead you down two different paths, but not necessarily with different results.
A robo adviser, such as SoFi, Betterment, or Ellevest, will do most of the work for you. It will buy and sell and select investments for you. Robo advisers automate investment management by using computer algorithms after evaluating your goals. Some benefits include a low requirement for investment and a quick process. You can also go the more traditional, or in some cases, in depth route with a broker, depending on how far you want to go in your investment journey. Of course, a traditional broker will require more of your time and money so it’s important to have your endgame in mind. Human interaction, of course, is arguably the biggest advantage of a traditional broker. An expert (if you find the right one) to advise you whose only goal is to help you grow your money? That sounds great if you’re a risk adverse person.
If neither of those seems like the right fit, a robo advisor hybrid might work for you. An online team of financial advisors is available at companies such as Vanguard and Personal Capital, so “ you get human oversight and interaction at a lower cost than a traditional financial advisor.”
If things seem daunting, keep in mind that it is possible to start small. Sometimes it can be difficult to know where to turn, but your professional and personal networks can be a great resource for support.
So get to know yourself financially, engage your circle, and keep these tools in mind.
In our next post, we’ll look at categories of funds and thinking outside the box when investing.
See you back here soon!
-The Loopston Team
