There’s no denying that investing is the best way to build true wealth. You can save your money all your life, but nothing beats the power of compounding interest – only found in investing. Investing tends to get a bad rap, and that’s only because people are afraid of what they don’t know. Don’t let a fear of not knowing how to invest stop you from getting started. I’m sharing the top 5 tips for women who want to invest, so you can get the ball rolling!
Types of investments
Before we dive into the top 5 tips for women who want to invest, let’s talk about the different types of investments there are. There are plenty of options outside of the stock market that people can invest in. Some common investment types include:
- Stocks (shares of a company)
- Bonds (essentially IOUs)
- Funds (basket of stocks and bonds)
- Annuities (securing funds at a later date
Read the article 5 Common Investment Types to Understand for more details around the investment types listed above. It’s important to make sure you understand the types of investments that are available to you so are fully aware of what you are getting into. For the sake of this article, we are going to be talking about investing in stocks or funds.
Priorities before investing
You’ve familiarized yourself with the different types of investments, now it’s time to make sure you have your priorities in check before you start investing. The article Are You Really Ready to Invest will give you some insight into getting ready to start investing. Before you begin putting your money towards investments, you want to make sure you have a few things taken care of. Those things are an emergency fund and no debt payments.
Debt Free and Emergency Fund Before Investing
You may be thinking, “well, if I invest now, the money I earn can be used towards paying off my debt.” While that’s not a bad way to think, I want you to picture it from the other side. If you have credit card debt with an interest rate of 20%, but you decide to invest instead of paying it off, your investments will yield an average return of 8%. That means it is costing you more to put your money towards investments instead of paying off your debt.
You will want an emergency fund handy before investing because if your money is tied up in investments and an emergency pops up, you’ll be out of luck. You can pull your money out of the investments, but it will take some time. Not to mention, you may not have gotten the return you were capable of getting, since you pulled your money out too soon.
Having your high-interest debt paid off first and a secure emergency fund (ideally 3-6 months’ worth of expenses), will put you in the best position to keep your money tied up into investments.
Tips for women who want to invest
#1 Become Knowledgeable
There are plenty of blogs, books, podcasts and TV shows tailored to investing. If you are seriously considering investing for the long haul, you will want to educate yourself as much as possible. A lot of the language may seem foreign to you in the beginning, but like any other subject, the more you familiarize yourself with it, the more sense it will make.
You can also take a class at your local community college to learn the basics of investing. There are so many things to learn and be knowledgeable about when it comes to investing, so make sure you are seizing every opportunity you have to learn more.
#2 Start with your 401k Investments
If you are contributing to a 401k or IRA, then you are already investing! Log on to your company’s 401k website and see what you are currently invested in. Look at what different investment options are available to you, and read into them. Most 401k plans come with a variety of investment options, and since you are already invested in something, this is the best place to start. I wrote an entire article around How to Research Your 401k Investments, check it out!
#3 Think about your long-term goals
You should already be saving for retirement. If not, make sure that is one of your long-term goals, and start investing towards it NOW! Next, it’s time to think about what else you want out of life. If you want to start investing, why? Are there certain goals you are trying to achieve in the future? Start by making a list of your long-term goals, when you want to achieve them and how much money you’ll need.
Having this information handy will allow you to pick investments to help you reach your target goal amount by your target date. There are investments that are riskier and can help you reach your goal if it’s large in price. On the flip side, there are investments that are safer and can help you reach a goal that may not be too far away.
#4 Find platforms you can start small with
Maybe you don’t have any goals for investing right now, you just want to get started. That works too! Platforms like Acorns, Stash, Ellevest and Betterment make it very easy to start investing with small amounts of money. You can also do the same with an IRA, however you can’t touch that money until you retire (unless you want to pay a fee).
A lot of these platforms are self sufficient but support is available. I highly recommend starting with one of the platforms listed above. It will be a great way to see different types of investments, familiarize yourself with trading functionality, and educate yourself on options available to you.
#5 Don’t hesitate to work with an adviser
Financial Advisers are there to monitor and manage your investments to help you reach your goals. If investing seems too complicated, or you don’t have the time to monitor your investments, find an adviser that you like. Financial Advisers are available through major banks, small firms, or independently owned businesses. Don’t think you have to go it alone!
If you want to make sure you are invested in the best options you can be for retirement, schedule a free financial focus call with me and we can discuss your options!
Related: Easy Ways to Start Investing Now
As I mentioned earlier, investing is the best way to build wealth, hands down. If you have big goals that are going to need big bucks to fund, then start investing now! Are you currently investing in any stocks, bonds or funds? What tips do you have for new investors? Share your tips and experiences by leaving a comment below!