If you’ve recently graduated from college, you’ve been told it’s important to start investing at an early age—but where do you begin?
As you settle into your new income and expenses, including student loans, how can you fit in investing as well? Luckily, you don’t have to be a Wall Street guru to begin building a portfolio and saving for retirement. These beginner investment tips can help fund your future.
1. Build an emergency fund first.
Before you start investing, build up a savings account to get you through unexpected expenses. Building a nest egg to cover car repairs or other small emergencies is wise no matter what your starting salary is. Kiplinger recommends that you have at least enough in a cash reserve to cover your expenses for 6 to 12 months.
2. Start with what your employer offers.
Many companies offer a 401(k) account, and some will even match a percentage of your contributions. For instance, if you allocate 3 percent of your paycheck into your 401(k), your company may also contribute 3 percent. Take advantage of this opportunity if it’s available. With time on your side, the earlier you start making regular contributions, the longer your investment has to grow.
A company-sponsored retirement account may put you in a default target-date fund, but you can make adjustments based on your personal goals, says US News & World Report. Speak with your account manager if you need guidance or financial planning advice.
3. Save and invest on your own.
If you don’t have a 401(k) or want to invest even more, you can open your own retirement account, such as an IRA or Roth IRA, as Money Under 30 explains. It’s best to speak to a financial advisor to discuss your goals and decide which account type is best for you. For example, an advisor might recommend that you invest aggressively since you’ll have years to recover from stock market fluctuations.
4. Avoid individual stocks.
Playing the market is complicated, and although you might want to dabble in purchasing individual stocks at some point, when you’re first starting out, diversification is a much safer route to take. As CNN Money points out, while half of Americans invest money in the stock market, only 14 percent own individual stocks. Look into mutual funds, which are a collection of stocks, bonds, or other securities that can help diversify your investment.
5. Automate your investments.
If you plan to invest money leftover from your paycheck after you pay your bills, you could end of forgetting or spending it on something else. Instead, have your bank take a percentage or set amount from each direct-deposited paycheck and transfer it into your investment account automatically, advises Bloomberg. This is also a good tactic to use for your savings account.
You don’t need to wait for a large salary to start investing. With tips from a professional advisor, you can start investing soon after college and help create a strong foundation that can grow into a large account by the time your retire.