5 helpful tips for young investors
If you’re young, you have a noteworthy advantage as an investor: time. You don’t need to have a ton of money or a vast array of investments to help make the most of that advantage. Whether you’re ready to buy your first stock or mutual fund or have already begun to build a portfolio, these moves can help make you a more informed investor.
Define your goals to help you allocate your money
Understanding your goals can help you allocate your money in pursuit of them. That starts by figuring out your short-, medium- and long-term goals. You might want to make sure you’re covering your regular monthly expenses and your retirement contribution, then put any extra toward next month’s vacation, paying down debt or saving for a future need, like a down payment on a house. “Balance enjoying some of your money now while saving for retirement and some of your other goals,” says Stacy Allred, wealth strategist at Merrill Lynch Wealth Management.
Pay yourself first
Keep up your saving and investing momentum by putting that money aside before you can spend it. “Determine the amount you would like to save, and build the habit early on of paying yourself first,” says Allred. If you’re investing through a brokerage account or in an IRA, you may be able to set up automatic transfers from your bank account, which you can change at any time if you need to. Or if you have access to an employer-sponsored retirement plan, such as a 401(k), “sign up for it immediately when you get your first paycheck,” she says.
Understand your investment choices
Some concepts might be unfamiliar if you’re just starting out as an investor. You can read about stocks, bonds, mutual funds and exchange-traded funds at Merrill Edge. It generally makes sense to diversify your portfolio, so you’ll want to understand the possibilities. Other things to consider as you choose your investments: rates of return and potential ways to minimize the commission or transaction fees you’ll pay.
Know your appetite for risk
Investing involves the risk that you may not get the returns you want or even that you lose the money you invested. Sometimes many investments lose value at once. Other times only some investments lose value. This is one reason diversification—having a variety of investment types—can be a good thing. Everyone’s time horizon and tolerance for risk is different. Read more about investment risk, and how to determine your risk tolerance, at Merrill Edge.
Consider investing in something you’re excited about
As you consider possible investments, learn more about them. What’s in the mutual funds you’re comparing? How much are you charged each year in fees? If you’re interested in buying individual stocks, “do the research and find companies you’re excited about,” Allred suggests. “You might even attend an annual shareholders’ meeting to step into that world of investing and start to experience it.”
Alternatively, you can visit websites, such as merrilledge.com, or use apps that provide investment information. Or you might get help from a financial advisor.
Asset allocation, diversification and rebalancing do not ensure a profit or protect against loss.
Investing involves risk including loss of principal.
Merrill Edge is available through Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S), and consists of the Merrill Edge Advisory Center (investment guidance) and self-directed online investing.
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