By: Jeremy Skoglund, VP Trust Officer
Do you ever refrain from playing a game because you either have never played it before or you know you’re not good at it? I do this occasionally. I like board games and card games, but I usually stay away from word games. I’ll say that it’s because I don’t enjoy those games, but really, I don’t enjoy them because I’m not good at them. I’m a numbers person, so games like Skip-Bo or Rack-O will get my vote before Scrabble or Boggle. When it comes to investing, I think a lot of people look at it as a game they won’t be good at. They are comfortable doing what they are doing, and all those investing terms like Asset Allocation, Mutual Funds, Expense Ratios, Index Funds, and Diversification make investing sound way to complicated and risky. Yes, investing is risky. But not investing is also risky. If you put all your money in a savings account that pays well below the rate of inflation, you are essentially losing money because, in 10 years your savings account money will not afford the same things it does today. Like Robert G. Allen (an investment author) asked, “How many millionaires do you know who have become wealthy by investing in savings accounts?”
So, what can you do to begin investing? First of all, if you are participating in a 401(k) or other retirement plan offered through your employer, you are already investing. But what if you want to put some money in an investment account outside of your retirement plan? Here are a few things to get you started.
Focus on the Long-Term
Investing is a long game. There will invariably be ups and downs in the market, so you can expect to see ups and downs with investments that you choose. But if you are investing and not day-trading, you can look beyond the daily ups and downs and focus on the long-term.
Ask for Help
Don’t feel like you have to do it on your own. There are a lot of resources online to help teach you how to invest, but finding someone to help you begin investing can offer many benefits. They can help you take the emotion out of investing, give you peace of mind, add to your bottom line, and teach you along the way. A good Financial Advisor will help you set up an investment plan, recommend investments that are in line with your risk tolerance, and help you stick to your plan.
Start Small and Make it Automatic
Understand that there is a chance that your investments could go down, depending on what you invest in.
Since you are just starting, it makes sense to start with an amount you would be comfortable losing. If you have set up an investment plan as mentioned above, the best way to stick to that plan is to set up automatic transfers into your investment account.
Review Your Plan Periodically
Go through your investment portfolio yourself or meet with your Financial Advisor at least annually to review your plan. There may be changes you want to make more frequently, but a lot of times, those changes are the result of your emotions. If you set up regular times to review your portfolio and stick to that schedule, you will guard against buying and selling too often, which will reduce your overall return.
If you still have questions about investing, please give us a call.