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How to start investing right now

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Investing can be scary. If you’ve never done it before, you might think you need loads of money to start investing (you don’t) or to put it all in stocks (you don’t). 

Investing
can be one of the most essential ways to plan for your future. You can save up for a down payment on a home
, stash money away for a child’s education or increase your cushion for retirement. And there are many ways you can go about an investment strategy — none of which need to be intimidating. Here are ways to start investing and what you need to know to grow your money
.

Read more: The best robo-advisors in 2020

1. Understand the risk

The point of investing isn’t to be risky, it’s to reap the rewards from your risk. Even so, you can be a conservative investor and still invest. Different securities carry varying levels of risk. For example, the stock market is riskier than bonds and index funds. 

Regardless of where you put your money, the most important thing to remember is that you shouldn’t freak out from every ebb and flow of the market. It happens, and in the long term, you’ll probably be OK.

One of the best ways to lower your risk is to diversify your investment portfolio. That means spreading out your investment allocation to many different types of investments, such as various stocks, bonds and mutual funds. That way, if you experience a drop in one security, it won’t hurt as much as if you’d invested all your money in it. If your 401(k) is invested in a target date fund, for example, it’s probably diversified across many types of investments, adjusting to take on less risk as you get close to retirement.

2. Determine your end goal

Before you choose where to park your money, you want to figure out what purpose that money will serve. If you’re saving for retirement outside of your work-sponsored 401(k), for example, you can try an IRA, or a retirement plan that you can have without your employer.

If you’re saving for a child’s education, you can try a 529 college savings account. These are like IRAs in terms of how they use your money to invest in a range of funds. 

If you’re planning to use your money within the next couple of years, you may want to consider a taxable investment account. This is a regular investment account where you invest in individual stocks, bonds and other types of funds. This might be a good idea if you need the money sooner than retirement, or have maxed out all your tax-advantaged account options.

3. Choose an account

The type of account you choose depends on the kind of investor you are. If you like the idea of micro-managing your money, you can try an online brokerage account. If you’re a hands-off investor, a robo-advisor might work best for you. Sometimes firms will offer a hybrid of both.

Online brokers: These investing accounts let you hand-pick your stocks and other securities to invest in. The best online brokers have minimal fees, market research and educational resources to help you make the best investment decisions. A few popular online brokerages to consider:

  • Charles Schwab — No minimum deposit required; $0 per trade for online stocks and ETF trades; professional advice (sometimes for no additional cost). 

You don’t have to limit yourself to only these options. Ally Invest offers self-directed portfolios and might be a good option if you already have an Ally account. Robinhood doesn’t charge any fees for anything, even cryptocurrency trades. Compare many different online brokers and choose the one that works best for your investment style and financial goals.

Robo-advisors: Robo-advisors are automated investment platforms that create and manage your portfolio. You’ll answer a few questions to get started, such as your goals for investing and the type of investor you are. Instead of a human managing your account, it’s handled by software and computers. The best robo-advisors have low-to-no account minimums, few fees and strong customer support. Some popular robo-advisors are:

  • Betterment — No account minimum; 0.25% annual fee.
  • Acorns — No account minimum; $1 to $3 a month to use.

Ally Invest also offers a managed portfolio section — its version of a robo-advisor. You can also look into using an online brokerage that has a robo-advisor. Sometimes there might be an account that offers a little bit of both.

If you already have a 401(k) through your employer, now is a good time to check in to see how it’s doing. How much are you paying in fees? What are you investing in? How much say do you have over what you invest in? See if you can contact your portfolio manager to review your account

Read moreFive types of investment accounts everyone should have

4. Make a deposit

A little bit goes a long way. Acorns is a micro-investment platform that uses your spare change to invest in exchange-traded funds. So even if you don’t think you have enough to get started, chances are you probably do.

Many companies don’t have minimum deposit requirements, which means funding your initial investment shouldn’t be a problem. Take a little bit of what you have to get started.

It doesn’t stop with your first investment, though. It’s important to continue contributing as often as possible. If investing was one of your financial resolutions this year, you’ll want to continue making regular contributions. Add a line item in your budget where you have set amounts of money that auto-deduct from your bank account every month. 

Read more: The best budgeting apps in 2020

5. Watch and adjust

If you have a robo-advisor, your account will pretty much handle itself. Many offer tax-loss harvesting. This is when your portfolio sells the investments that are down to minimize further loss. It then helps lower what you’ll pay in capital gains on your taxes next year. 

Read more: Best tax software for 2020: TurboTax, H&R Block, TaxSlayer and more

Online brokerages need a bit more attention. If you have an account with a human manager, you should be able to get expert investment advice from a financial planner on specific investments you’re looking to get into (or out of). You might tinker with your investments much more than a robo-advisor, but it’s usually because you’re taking a higher risk in hopes of a bigger reward.

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