How to Start Investing

How to Start Investing

A common misconception is that you must have a lot of money or be established in your career to begin investing. In reality, it is best to begin investing as early as possible, and you do not need to begin with a substantial amount of money. Investing a small amount is better than not investing at all, and the younger you are, the more you stand to gain from investing due to compounding interest. Here’s how you can get started.

Understand your purpose

First, you need to determine your purpose for investing. Are you investing for retirement purposes (referred to as “qualified” dollars due to their potential tax deferral benefits)? Or for nonretirement purposes (“nonqualified” dollars)?

Determining if you’re investing for retirement or nonretirement purposes will help you determine which type of account to open. Please be sure to consult with a tax professional to ensure you are eligible for a qualified retirement plan. Nonqualified investing is a great alternative and/or complement to a retirement savings account, such as a 401(k) or IRA.

Determine the right form of investment

If you are actively employed, one simple way to start investing is to explore whether your company offers any retirement plans, such as a 401(k), and if you are eligible to contribute.

401(k)s and IRAs for retirement investing

A 401(k) is a retirement savings plan sponsored by an employer that allows employees to save and invest a portion of their paycheck. Often, the employer will also offer to match a percentage of the employee’s contribution and/or make a contribution on behalf of the employee. The plan may offer traditional pre-tax contributions or Roth after-tax contributions. Learn more about the differences between a 401(k) and Roth 401(k).

If you do not have access to an employer-sponsored plan, an IRA or Roth IRA may be a good alternative. Like a 401(k), an IRA account is meant for retirement investing purposes. It grows on a tax deferred basis, and in some cases, they offer tax benefits.

Mutual funds as supplemental investing

Aside from investing for retirement, you may decide to make supplemental investments. Mutual funds are often a good option for new investors as some mutual fund companies allow you to begin with a contribution as small as $50 per month. Your investment can be automatically drafted from a checking account. This automated aspect is appealing for new investors because it doesn’t require frequent action by the investor.

Start investing today

The first step to becoming an investor is doing exactly what you’re doing right now: reading, researching and learning about your options. Understand your purpose and which investment option best helps you reach your goals. Determine how much you are able to invest on a monthly or annual basis, and get started with a 401(k), IRA, mutual fund, or other account.

When you’re ready to begin, speak to a trusted financial professional who can help guide you in the right direction by evaluating your overall financial picture, income, expenses, time horizon, and risk tolerance. And remember, it’s important to begin investing as early as possible. The earlier you start investing, the greater potential for investment earnings!

Jason Egge is a Financial Advisor with Osaic Wealth, Inc. Securities and investment advisory services offered through Osaic Wealth, Inc., member FINRA/SIPC. Osaic Wealth is separately owned and other entitites and/or marketing names, products or services referenced here are independent of Osaic Wealth. Check the background of this investment professional on FINRA’s BrokerCheck. Not FDIC Insured. No Bank Guarantees. May Lose Value. Not a Deposit and Not Insured by any Government Agency.

Jason Egge

Jason Egge

VP, Financial Services Manager (515) 245-2892 Email Jason

Jason Egge joined Bankers Trust in 2004 and has more than 25 years of experience in the financial services industry. Jason partners with his clients to develop retirement strategies based on thoughtful consideration of their individual needs. He follows through with them, encouraging customers to meet regularly in a comfortable environment to review each unique portfolio, ensuring that their investments meet their changing life needs. Their assets include stocks, corporate bonds, municipal bonds, government bonds, mutual funds, ETFs (Exchange Traded Funds) and annuities.

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