Ready to dip your toe into the world of online investing? Congratulations on taking the next step on your road to financial wellness! Investing your hard-earned money is a great way to watch it grow, rather than have it sitting stagnant in a 0% interest checking account (or in a shoebox tucked away in your closet).
Thanks to the huge advancements in the world of fintech, or financial technology, you can now easily and securely invest your money completely online. This is a great option for investment newcomers, as you can start small with a simplified process, and benefit from lower fees than those charged by traditional investment brokerages.
Below we share four important things to know when setting up your online investment, to ensure a seamless, stress-free process, and a great return on your investment!
1) Finding a Home for Your Investments: Online Brokerage or Robo Advisor
In the world of online investing, there are two main categories of service providers catering to investors: online brokerages and robo advisors. Choosing between these options boils down to how much involvement you’d like to have in the investment process.
Investment-enthusiasts who are looking for a hands-on approach to building and managing their money, may be drawn to an online brokerage, which allows you the flexibility to buy your own stocks, funds, or ETFs, and adjust your portfolio as the market changes.
Beginner investors may prefer the guidance of a robo advisor, an online investment firm that uses an algorithm to curate a unique portfolio based on your personal needs and investment goals, with a minimal fee. Finch, a Robo advisor, offers an online diversified investment account that enables you to start investing free of charge, thus allowing you to put your money to work without the worry of significant monthly fees.
2) Knowing How Much to Invest
A common myth is that you need a lot of money in order to start investing. Not anymore! Online investment firms have made investing more accessible than ever because everyone deserves the opportunity to grow their money. Many online brokers and robo-advisors require no minimum to open an online account, allowing you to start small, and increase your investment over time through regular contributions. Finch even offers an all-in-one investment and checking account, allowing you to easily access to your balance, whenever you need it. This eliminates the need of having to set aside money for investment purposes; now you can put all your money to work for you!
3) Understand your Investment Goals
Knowing what you are saving towards will impact how you’re investing your money. Consider your end- goal so that your online investment strategy aligns with your needs. Investments like stocks or bonds are a great long-term money-growing solution for retirement (or even early retirement)! If you don’t plan on touching your money for 10+ years, you can consider investing in riskier assets that provide greater opportunities for growth.
Alternatively, if you’re saving for a large purchase – like a car or a house – that you’ll be making within the next 2-5 years, then you’ll want your money to grow somewhere that offers less risk of market loss, as well as greater liquidity, or the ability to access your invested dollars when you need them.
Many robo advisors will offer varied tiers of investment accounts based on the goals for your investment, your liquidity needs, and the level of risk that you are willing to take.
4) Keep it Simple
Investment-speak can be overwhelming for a newbie, and while an understanding of various stocks, bonds, and assets and diversification is important, in the beginning it’s okay to keep it simple. As a new investor, you’ll likely start hearing about ETFs (Exchange Traded Funds); think of these as neat packages of investments that can be traded, just like stocks. ETFs can contain multiple types of assets, or investments, like stocks, bonds, or commodities, making them a great option for investors looking for a diversified, low-risk, low-cost investment strategy.
If you’re not taking a self-directed approach to investing, a robo advisor can select a customized mix of ETFs catered to your goals and liquidity needs, and further, it will monitor your investment regularly. They will re-balance your ETFs based on market fluctuations, so that your money stays on target towards your goal. We like to think of it as an investment autopilot! As you get your feet wet, many robo advisors will let you adjust your portfolio mix or even switch your investment package as your needs change.
Starting to invest your money early is a great strategy for growing your finances over time, and thanks to evolutions in the world of financial technology, smart online investing has never been easier. Whether you take a DIY approach to building your portfolio or opt for the hands-off simplicity of a robo advisor, take comfort in the fact that you’re now making your hard-earned dollars work for you!
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