getting started with investing

NJ Investment Advisor Shares 5 Investment Tips When Just Getting Started

You work hard for your money, but is your money working hard for you? As important as it is to save, most people won’t be able to reach their financial goals efficiently by saving alone. As a NJ investment advisor, I know how overwhelming the investment universe can be, but fear and panic shouldn’t prevent you from taking the first step.

Entering the investing world for the first time can seem daunting, but investing can be one of your greatest tools to help your money grow and get you that much closer to reaching your goals.

At Foran Financial Group, we work with a lot of young investors as they start their financial journey. In our experience, there are 5 steps that can help beginner investors.

1. Get Started!

Analysis paralysis is a real thing, overanalyzing or overthinking a situation to the point of immobility. This is especially common as it pertains to the world of money and investments. The idea of putting your money into a specific investment – and potentially losing it – can be scary.

To lessen this anxiety, when just starting out, keep things simple. Taking the first step is what’s important here, even if contributions are small and conservative at first. You can always ramp up your investing efforts over time once you’re comfortable.

A company-sponsored retirement plan can be a great initial step into investing. A 401(k) is equipped with a menu of high-quality investments, with the option to determine how much you invest each month from your paycheck, at your preferred risk level.

Don’t have a 401(k)? Talk to a financial advisor about opening an Individual Retirement Account (IRA).

Retirement plans carry many benefits, from tax deferrals to employer-match programs, and can be an easy introduction to the world of investing.

 

Not sure how to get started? Schedule a no-obligation conversation with the team at Foran Financial Group and take the first step.

 

2. Don’t Leave Money on the Table

On the subject of 401(k)s, check to see if your company offers an employer match. This is essentially free money that you don’t want to pass up.

Here’s how employee matching works:

Suppose your company offers to match 100 percent of your 401(k) contributions up to 3 percent of your total limit. That means that for every dollar you direct from your salary into your 401(k), your company will double the amount, up to 3 percent (or whatever percentage they promise). This can be an easy way to maximize your contributions with little to no extra effort.

If your company is publicly traded and a certain size, a company stock purchase program may also be offered to you, with company shares available at a discount. Employee Stock Purchase Plans (ESPPs) offer many benefits. Not only do you usually receive a profit right off the bat, by receiving the shares at a discount (you can immediately sell them if you want), but you also have the opportunity to experience significant growth if your company’s stock price increases. If you believe in the future of your company’s stock, take full advantage of your ESPP if you have one.

It’s wise to discuss your options with a financial advisor first to make sure it aligns with your financial goals.

3. Identify Your Financial Risk Tolerance

Any investment carries some amount of risk. The key is determining how much risk you’re comfortable with.

There are many free, simple risk tolerance tests available online, but determining your true financial risk tolerance depends on many things, from your personality to your family makeup. And it’s often different than your risk tolerance in life in general. Your financial risk tolerance is the amount of risk or price fluctuations you are willing to endure before you start to lose sleep at night.

In other words, just because you like to skydive doesn’t mean you’re comfortable with taking an aggressive investment strategy with your retirement nest egg.

There is no right or wrong risk tolerance, and your risk tolerance can change over time, especially due to life events, like a new job, a change in family structure or receiving an inheritance. Remember to keep your risk tolerance at the forefront when picking investments. If you overestimate your risk tolerance, you may panic and sell an investment before it has a chance to recover (and lock in a loss) if its value declines unexpectedly.

If you’re unsure what your financial risk tolerance is, Foran Financial Group can help.

4. Establish Your Financial Goals

The other crucial part of a sound investment plan is your financial goals. Your goals and risk tolerance should directly drive your investment strategy and choices. Think about your future. What is your preferred lifestyle as you get older? What are your overall goals?

Determining your financial goals will help you establish your risk capacity, or how much risk you need to take in order make your dreams a reality.

Make note: Once you start investing and establish a plan, it’s important to update that plan accordingly as your life and goals change, at least once a year, to make sure you stay on track.

If you’re not sure how to align your investments with your goals, seek help from a financial advisor who does. The last thing you want to do is plan for a future you don’t actually want.

5. Work with a Financial Advisor to Avoid Making Mistakes

In 2019, it was estimated that 99 percent of the population didn’t have a financial advisor. However, the same report showed that working with an advisor helped investors avoid mistakes and stay focused in volatile markets.

At Foran Financial Group, we help a lot of young investors get started, and as a NJ investment advisor, I can tell you there are no dumb questions! It’s important to understand the reason behind your investment choices and the strategies you decide to follow. No one enjoys learning a financial lesson the hard way.

A financial advisor can also help you personalize your investment portfolio in accordance to your beliefs and priorities. (Read our recent blog post: Social Investing: What it Means and How to Make it Happen.)

The Takeaway

Investing can be intimidating, but there’s no need to fear the market. In fact, one of the biggest mistakes we see American workers make in their retirement planning efforts is not getting started!

Take the first step. Act prudently. If you’re not sure where to start, reach out to me directly and get a conversation started!

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Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

The financial professionals associated with Foran Financial Group may discuss and/or transact business only with residents of the states in which they are properly registered or licensed. No offers may be made or accepted from any resident of any other state.