Investing funds in the stock market can lead to excellent returns, which is a major reason why an increasing number of people opt for this route to reach their long-term financial goals. However, investing can often seem intimidating and scary to many first-time investors. As per Scott Tominaga, first time investors need to research properly, and look for investment options that effectively meet their financial goals, budgets, and risk appetite.
Scott Tominaga marks a few good investment options for beginners
A lot of people are taught from a very young age that saving is the most direct path to building wealth and achieving financial freedom. However, it is important to understand that even though saving is vital to the pursuit of both goals, making smart investments with the funds one has makes them much more attainable. Here are a few good options for people to get started with investing and earning money on their savings:
- High-yield savings account (HYSA): This is likely to be among the simplest ways to boost the return on money above what a person is earning in a typical checking account. High-yield savings accounts commonly pay higher interest on average than standard savings accounts while still providing customers regular access to their money. A HYSA can be a good place to park the funds one is saving for a purchase in the next couple years or simply to hold money in case of an emergency.
- 401(k): A number of employers in the United States today offer a 401(k) retirement plan as part of their benefits package. With a 401(k), one would have a specific percentage of their pay held back as a contribution. Based on the type of account, this can be pre-tax or post-tax. A traditional 401(k) contribution is pre-tax. It would lower the taxable income of a person, meaning that they would pay taxes when withdrawing funds at retirement. Contributions for a Roth 401(k) are taxed upfront; hence one would not owe taxes on their money as they reach the retirement age.
- Short-term certificates of deposit (CD): A certificate of deposit implies to a type of savings account that provides a higher APY (Annual Percentage Yield) in comparison to a traditional savings account. With a CD, one would be able to deposit a lump sum of cash for an agreed-upon time frame. During the account term, the investor cannot access the funds without paying a penalty. As the CD reaches maturity, the investor may withdraw the money or deposit the funds into a new one.
- Mutual funds: Instead of putting all the funds into individual funds, investors should consider investing in a mutual fund. A mutual fund is simply a group of investments one can purchase a share of. A manager determines where to invest the money. Doing so can be useful in diversifying the investments and avoiding putting all the eggs in one basket.
As Scott Tominaga underlines, the idea of investing can be intimidating when a person is just starting out, but it is a vital aspect of saving for various financial goals and building wealth. Investors are likely to encounter varied market environments throughout their investing life; hence it is better to not get too caught up in whether or not now is the perfect time to get started.