Now that we’ve entered the New Year, it’s time to talk about resolutions. According to USA.gov, the popular choices often include saving money, losing weight, or finding a better job. An excellent addition to this list would be starting to invest.
As a former stockbroker, I see a rise in new investors every January. This can seem overwhelming, especially for beginners. But investing doesn’t have to be scary. There are some basic rules that can help novices get started. If you’ve decided to make investing your New Year’s resolution, these tips can guide you.
DON’T LET A LACK OF FUNDS STOP YOU
Many people think they need a lot of money to start investing—like thousands or even tens of thousands of dollars. That’s simply not true. You can actually begin investing with a modest amount of money. What’s considered “modest” varies from person to person, but it’s a myth that you need a huge sum of money to start. Many brokerages will let you open an account with just $500 or less.
Don’t be discouraged by limited funds. See it as a challenge and start investing as soon as you can. If money is tight right now, start saving small amounts monthly. By setting aside an extra $20-$50 each month, you can begin your investment journey in about six months through many online brokers. Remember, every penny counts, and your future self will thank you for starting, even with a small amount.
AUTOMATION IS KEY
We often put off important but time-consuming tasks due to our busy lives. Investing for your future can become one of those neglected tasks. The solution? Automate it. If you find it hard to make regular contributions despite having the funds, automation can help.
Many online brokers, like Motif Investing, allow you to set up automatic deposits at intervals you choose. This way, you won’t have to remember to make manual contributions, and you’re less likely to miss the money leaving your account. If you have a 401(k), you can apply the same principle by increasing your paycheck deductions or setting up annual rebalancing.
KEEP IT SIMPLE
New investors often complicate their strategies by trying to outdo the market, leading them into risky situations. Instead, keep it simple and invest in low-cost index funds. These funds generally track market trends, making them less complicated.
Most online brokerage accounts offer a list of top-rated funds that you can choose from. They’re also easy to find through a quick internet search. If you’re investing in a 401(k), most plans offer several low-cost fund options. If they don’t, talk to your Group Benefits department to ask for some, as they are there to help you.
If you’re starting your investing journey this year, congratulations! Keep these straightforward tips in mind, and you’ll be on the right path to building wealth that will serve you well for many years to come.
John Schmoll, the founder of Frugal Rules, started this blog to help people achieve financial independence. An experienced budget planner and investor, he enjoys sharing his knowledge to help others avoid financial mistakes. With an MBA in Finance and a background as a licensed stockbroker, John brings valuable expertise to the table.