More For Your Money - University of Illinois Extension

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How To Start Investing

First, you need to be sure that your financial foundation is solid. Remember the Steps Toward Financial Security? Are your bills paid on time and your credit good? Do you have the insurance you need? Do you have enough savings in your emergency fund? If you answered yes, you’re ready to start investing for long-term goals.

Steps Toward Financial Security

One way to start investing is purchasing shares in a mutual fund. A mutual fund is a group of many diverse companies’ stocks and/or bonds. Owning a little bit of many companies helps diversify your money. When your investment is diversified, you lower the risk of losing money.

Index mutual funds are companies that represent all aspects of the market. For example, a stock index mutual fund has shares of companies that represent the total stock market. One low-cost way to start investing is to buy shares in a no-load index stock mutual fund. A no-load mutual fund does not charge you a fee to buy the fund.

Many people choose to invest money in an employer-sponsored retirement plan at their job. Some employers will match your savings. For example, if you put $1 into a retirement plan at work, your employer may also put in a dollar. A match is an easy way to make money. If your employer will do this, then this is usually a great way to save and invest your money.

Most retirement plans at work are tax-deferred. Tax-deferred plans let you invest dollars before you pay taxes; thus you have more money working for you.

The Key Points To Starting To Invest Are

  • Keep your money in a safe place.
  • Money invested in mutual funds is less at risk from “purchasing power risk” than in savings accounts.
  • Be aware that stocks, bonds and mutual funds value will go up and down.
  • Buying individual stocks and bonds is much riskier than buying mutual funds.
  • Invest money for the long-term to increase your chances of making money.