- Written By Rubina K. Hossain, CFP®
Rubina K. Hossain, CFP®
Certified Financial Planner™ Professional
Certified Financial Planner Rubina K. Hossain is chair of the CFP Board's Council of Examinations and past president of the Financial Planning Association. She specializes in preparing and presenting sound holistic financial plans to ensure her clients achieve their goals.Read More
- Published: February 23, 2021
Investing is one of the most effective ways to build long-term wealth.
And entering the stock market is more affordable than you may think. You can start investing with as little as $5 with apps such as Stash and Acorns.
But before you begin, you should first build an emergency fund.
Once you have at least three to six months’ worth of expenses in a savings account, start investing regularly for your future money goals and watch the magic of compounding.
When you wait to invest, you are putting yourself at risk of not meeting your goals — such as retirement — and will then need more money to invest to achieve the same result.
Steps to Take Before Investing
To begin investing, first create a monthly budget.
Ideally you want 50 percent fixed expenses, 30 percent discretionary spending and 20 percent savings.
Then focus on funding an emergency fund — at least three months’ worth of expenses — as well as any needed insurance, such as disability or life insurance. And if you have high-interest credit card debt, it is wise to start paying that off as well.
Once these basics are covered, start focusing on saving for your future. You can go online to find a quick retirement calculator to see how much you should save given your goals and objectives.
Before you start investing, you should also assess what your level of risk is towards the stock market.
If you are unable to feel comfortable when the market goes through turbulent swings, then you shouldn’t invest all your funds in equities, but mix this with less volatile instruments such as bonds.
How to Get Started with Investing
There are apps to begin your investing journey. Even large investing firms such as Vanguard and Schwab have lowered their minimums to attract millennials.
And investment firms who traditionally have targeted clients with high-level assets have begun to offer complete online platforms to open accounts with lower minimums.
With an app like Acorns, you can start investing with just $1, and the entire process takes just five minutes by following their prompts. Other popular investing apps include Stash, SoFi Active Investing and E-Trade.
For less than $5 a year, you can use Vanguard Digital Advisor with at least $3,000 invested. The service allows you to identify your important goals, develop your risk attitude and set preferences that keep you up to date on your progress. The tool creates a custom road map with additional features on the horizon.
The traditional investment firms have similar online processes as Vanguard, which also includes continued support from the advisor.
No matter which avenue you choose, it’s easier than ever to start investing in your future.
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