This story is part ofCNET coverage on smart money decisions for today’s changing world.
Investing is a great strategy if you are looking to build your wealth.From stocks to investment trustsThere are many ways to unlock your money potential in 2022.Whether you have $ 100 or $ 10,000, you can take advantage of startups like: DIY investment platform (including ), And traditional financial companies such as Vanguard and Fidelity.
But the proliferation of options means making more choices, not to mention more voices competing for your attention (and money). And now that everyone can broadcast investment advice from their smartphones, it’s difficult to identify reliable advice, and following the wrong TikTok financial guru or Twitter cryptocurrency can be costly. There is sex. The stakes are high.
So how do you navigate the investment environment today wisely? To find out, CNET has a proven strategy and.. Here are some best practices (both 2022 performance and up-to-date) to help you get started.
Don’t skip this step: Understand what you want your money to do
Choose a stock, choose an investment trust, or buyIt may actually be an easy part.But a particular investment, strategy, or philosophy is less important than you know why You are investing in the first place. In other words, what do you want to do with your money?
James Lee, Official Financial Planner and President-elect Financial Planning AssociationEven before talking about investment strategies, always start working with his clients by considering their life goals.
“Ask them what their goals are for financial resources in the future,” Lee said. “It is important to understand that your goal is to notify your timeline and build a portfolio that undertakes the appropriate risk and return characteristics to achieve those goals.”
Although every individual has their own reasons to invest, most of us have a common goal: saving for retirement, buying a home, and perhaps paying off student debt, starting a business or.. Your goals may evolve as well, and a larger economic picture should influence your approach.For example, now you may be worried about strengthening the eggs in your nest When ..
It can be difficult to clarify your life goals and imagine your future, but doing so is an important first step in your investment. Setting clear goals and reviewing them each year can help inform you of the timing, strategy, and motivation for risk.
Your goals may include external and even non-financial considerations. Socially responsible investment According to financial planner and founder Anjari Jariwara, it is an important touchstone for many. Fit advisor.. Similarly, More and more investors are establishing or restructuring their portfolios, ..
Make it automatic.And always take “free” money
For most of us, the main investment goal is Recent research Published by Personal Capital, an online wealth management platform... According to Farnoosh Torabi, editor of CNET Money, financial independence for a comfortable retirement is a top priority for most people. However, only 57% of Americans have some form of retirement savings.
If you work for a 401 (k) or an employer-sponsored company that offers a severance pay account, there are two reasons to opt in. First, a fixed percentage of all salaries are used for the investment and donations are made on a regular and automatic basis. Second, your employer may be in line with some or all of your contributions.
For example, if you earn a total of $ 4,000 a month and your employer matches up to 4% of your salary, you need to donate $ 160 to receive a full employer match. Combine your contributions with your employer’s contributions for $ 320 a month, or $ 3,840 a year.And you can always contribute more-in 2022, the individual $ 20,500 for a 401 (k).. As a general rule of thumb, Jariwala recommends that your employer at least put in a matching amount so you don’t miss out on “free” money.
You can also open an IRA if you have more money to invest after you’ve used up your 401 (k). This is a special class of savings account with some protection from taxes. AYou can make pre-tax contributions during your service period, and if you withdraw at retirement, your money will be taxed as ordinary income.
With Roth IRA, money is taxed on the way to your account and you can withdraw 100% tax exempt after retirement. This arrangement is ideal for young workers early in their careers or for low tax rate workers.The point to note is, “Because there is an income limit, once you Specific income level, I can’t contribute any more. When you’re young, it’s a really great time to put as much money into that Ross IRA as possible. “
Choose the right strategy to reach your goals
After decades of relative stability, the economic situation is changing now. Earlier this month Ministry of Finance Inflation Protection SecuritiesA type of government bond that balances inflation.And we have a series as a result.find It is becoming more and more important. Price increases can erode the portfolio, as you can buy for the same $ 100 cheaper than the day before. However, some types of assets are more susceptible to inflation than other types of assets.This is some retirement accounts, real estate, and
Today, “investment” is often associated with aggressive trading of stocks at Robin Hood and other brokerage firms. This means frequent buying and selling, based on market analysis. However, making credible profits through aggressive investment is very difficult even for professionals, and for most people it is not the most practical or effective way to manage money.
Passive investment modes, such as the use of index funds and ETFs, are a better choice for most people. Passive investments usually mean buying and selling assets over a long period of time, as opposed to active investments where you (or your portfolio manager or broker) buy and sell individual investments on a regular basis.
As the market declines, index funds are designed to provide average returns across the market and track the performance of market benchmarks set up such as: Standard & Poor’s 500 Also Nasdaq Composite Index.. The rationale is that in the long run, markets are usually better than a single investment.According to a survey, index funds Make it better on a daily basis Than actively managed funds. Passive investment through investment trusts has been particularly productive for the youth generation, who take decades to build wealth early in their careers.
Even Warren Buffett, one of the wealthiest people in the world and Chairman and CEO of Berkshire Hathaway, is a fan of index funds.Quote A small book of common sense investment, Buffet said in an interview: “Low-cost index funds are the wisest equity investment for the majority of investors. By investing in index funds on a regular basis, unsuspecting investors can actually outperform most investment professionals. . “
Even better, index funds are less risky and usually cheaper than other types of investments. Unchecked fees can erode your portfolio over time. Buying an index fund yourself is not particularly complicated, butIt will help you identify which one makes the most sense to you and manage your portfolio.
Don’t put in more than you can afford to lose to a risky investment
Once you’ve covered the basics of retirement, long-term investment, emergency funding, etc., you may diverge into higher-risk or less-proven ventures. Risky investments often result in higher returns … if the investment is successful (and it is large).
Cryptocurrencies are an alternative to exploration.You can do it Coinbase Also Binance..But it’s important to understand that Highly volatile. Not suitable for everyone. To withstand the market downturn, you need high risk tolerance and financial margin. You also need to make sure you lose money and still be able to pay the invoice.Buy tokens such as Bitcoin and Ethereum at the following exchanges
Lee recommends investing in crypto only if you have assets that you can guess, that is, if you have zero assets and it does not affect your ability to reach your financial goals.
Even if you decide to immerse your toes in crypto water, it’s wise to start small. For beginners, Jariwala recommends allocating 1% to 3% or less of the entire portfolio.
Learn the basics, but don’t ignore the changing world of finance
Of course, a single article or advice can only be understood so far. That’s why it’s important to stay proactive about your financial future. Part of that is to follow the news of the day (whether a pandemic affects the supply chain, how the war affects gasoline prices) and how it affects profits.
Finance book favorite Rich dad poor dad, Total money makeover Also A small book of common sense investment You can deepen your understanding of fundamentals. (Maybe it starts Blinkest, Provides a detailed summary of over 5,000 books. )
You can also get professional help, but it may not be as expensive as you might think. Certified financial planners can create portfolios, manage finances, and assist with taxes.You can consult with the Financial Planning Association PlannerSearch To find someone in your area. Please note that advisors usually charge a flat rate or receive a portion of their portfolio in exchange for providing the service. And make sure your advisor is a trustee. That is, they are legally required to put your financial interests first.
There is no one-size-fits-all approach to investing. But there are never more self-service tools and resources to help you get started.
See the guide for more information.And our list ..