How Do I Start Investing? With Jenny and Tina
On this episode of Financially Naked: Stories from The Financial Gym, our hosts are Jenny and Tina, two Certified Financial Trainers at The Financial Gym. They're tackling a topic that can seem intimidating but holds incredible potential: investing.
Investing isn't just for the wealthy or the financial gurus. It's a strategy that can help anyone grow their money and achieve their financial goals. Whether you're looking to save for retirement, buy a home, or fund your dreams, investing is a key step on your journey.
In this episode, they'll break down the basics of investing, demystifying terms like stocks, bonds, and asset allocation. They'll discuss the importance of setting clear goals to make informed investment decisions and how to get started even if you're brand new!
Podcast Notes
There are two main types of investing: investing for retirement and investing for non-retirement. Which kind of investing you focus on depends on your goals.
Investing accounts specifically for retirement can include 401ks, 403bs, and IRAs. These have specific rules and benefits related to when they're taxed and how/when you can use them.
A brokerage account is for non-retirement investments. This account allows you to add money and purchase whatever stocks you want. The rules about when you can take money out of these are much more flexible.
The money for your emergency fund in a HYSA is not considered investing.
What is investing?
Investing is a long-term strategy to build wealth and achieve large financial goals, like retirement. It's setting aside money or resources to generate a return or profit over time.
It can include purchasing assets like stocks, bonds, real estate, or mutual funds. The goal of investing is to grow your wealth over time by leveraging the power of compounding interest.
It involves taking on some level of risk, as investments can fluctuate in value. This tends to be the part that makes clients the most nervous.
Investing Basics Glossary
Stocks: A stock represents ownership in a publicly traded company. When you buy a stock, you become a shareholder, which means you have a claim on the company's assets and earnings. Stock prices can fluctuate based on various factors, including the company's financial performance, industry trends, and market conditions.
Bonds: Bonds are debt securities issued by governments, municipalities, or corporations to raise money. When you buy a bond, you essentially lend money to the issuer in exchange for periodic interest payments and the return of the principal amount at a specific date. Bonds are generally considered safer investments than stocks because they offer fixed income and are typically less volatile.
Asset Allocation: Distributing investments across different asset classes (stocks, bonds, real estate, etc.) to achieve a desired risk-reward balance. If you think about your money as a pie, it's how it is split up.
Diversification: Spreading investments across various assets to reduce risk by avoiding overexposure to any single investment. Don't put your eggs in one basket.
Dividends: Payments made by a corporation to its shareholders as a portion of the company's profits.
How can I start investing?
Don't get overwhelmed. While investing can feel complicated, you can keep it simple. You are already investing if you contribute to a retirement account, like a 401k or 403b.
Investing is a way to build wealth over time. Approach it as a slow and steady, long-term saving strategy. Time is your best friend when it comes to investing.
Robo-Advisors can be a great tool if you're starting out and the idea of investing is intimidating. Robo-advisors are automated online platforms that provide algorithm-based portfolio management services.
The process typically starts with an online questionnaire to gather information about the investor's financial situation and goals. The robo-advisor algorithm suggests an appropriate asset allocation and investment strategy based on the data provided.
Robo-advisors provide a hands-off approach to investing, requiring minimal effort and time commitment from the investor. Once the investor approves the recommended portfolio, the robo-advisor automatically manages the investments, making adjustments as needed.
Pros of robo-advisors include lower fees compared to traditional human, financial advisors, accessibility for smaller investors, and ease of use.
You can use a traditional investment firm, Fidelity, Vanguard, or Schwab. They have minimal fees and lots of options to buy. Some of these firms are also stepping into the robo-advisor game.
If you want to work with a Certified Financial Trainer to learn more about investing, schedule a free warm-up call today! If you have any ideas or questions for the show, send an email to trainerpodcast@fingyms.com.