10 Burning Questions You’ve Wanted to Ask About Investing
As the saying goes, there’s no such thing as a dumb question—and that’s especially true when it comes to investing.
After all, putting your hard-earned dollars into an investment account isn’t the same as simply stashing it away in a checking or savings account.
You’ve got decisions to think about: What will I invest in? How do I manage my investments? What do I do if the financial news gives me the jitters?
Well, we’re glad you asked because a good way to learn about your finances is to fearlessly ask all of the things that make you scratch your head when you’re just learning to build a portfolio.
That’s why we’ve compiled ten of the most common questions we’ve heard about beginning investing, and then asked a few financial professionals to weigh in with some answers to help you boost your investing smarts.
1. Investing seems complicated. How do I get started?
The first step is to determine what you want to achieve with your investing, whether it’s in the short-term or long-term, says Hans-Christian Winkler, a CFP® with Seattle-based independent advisory firm ClaraPHI. Are you primarily saving for retirement, which means you may not access that money for decades? Or is there some other major goal, like an expensive dream trip, that you’d like to take in a few years?
Next, you should think about how hands-on you want to be with your investing, says David Blaylock, CFP® with LearnVest Planning Services. “And there’s no wrong answer to this,” he adds. “Ask yourself, ‘Do I want to get into the nitty-gritty, evaluating multiple investments, and agree to do that regularly? Or would I rather set it and forget it?’ ”
If you’re saving for retirement, for instance, you may choose to invest in a target-date fund, a type of mutual fund that automatically adjusts your investment mix based on your age and how soon you’d like to retire. If you want to be more hands-on, then you’d probably have to do more research on the types of investments that make sense for your timeline and risk tolerance, and consider rebalancing your portfolio as time goes by.
One thing you should keep in mind, however, says Blaylock, is that money in an investment account is typically better earmarked for a goal that’s at least five years away because you’re probably subjecting your money to some level of risk. Any shorter time frame than that, he adds, “and I would consider steering back toward safer investments, like a CD, savings account or bonds.”
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