by Chelsea Springli 
A common misconception is that investing is for people with a lot of money. Let’s put that rumor to rest, shall we? Investing is just a way to grow your wealth over time. In other words, investing is for beginners too! Of course, your investment plans will depend on your life situation like how much you can contribute, what your savings goals are, how much you currently have saved and more. Here’s some basic info to help beginners get started.
What is Investing?
Investing is a way to potentially increase the amount of money you have over time. The goal is to buy financial products, also called investments, and hopefully sell them at a higher price than what you initially paid. Investments are things like stocks, bonds, mutual funds and annuities.
Stocks and Bonds. An individual stock is like buying a little piece of a business. Your profits or losses depend on how the business is doing. If it’s doing really well it can lead to big gains, but it could also lead to big losses too depending on the stock market. Bonds are different. Instead of buying into a business, a bond allows investors to loan money to an in exchange for interest payments over time. Stocks fluctuate more often while bonds are typically more stable.
IRAs. IRAs (Individual Retirement Accounts) help you save money for retirement and benefit from tax advantages to help that money grow. An IRA is a personal savings account that’s made up of varying investments. It might include stocks, bonds, annuities, certificates, mutual funds or other types of investments. As you contribute money into your IRA the taxes on that money are deferred until the funds are withdrawn. Depending on the type of IRA, sometimes the funds aren’t taxed at all. It’s important to keep in mind that IRAs are designed for retirement savings, so you could owe penalty charges if you withdraw IRA funds early. Alltru offers three IRAs.
- Traditional IRA – investments are tax-deferred, so you won’t pay income taxes on your earnings until you withdraw funds
- Roth IRA – investments are funded by after-tax dollars, but qualified distributions may allow you to make tax-free withdraws
- Coverdell Education IRA – This IRA allows you to save money tax-free for your child’s education. You can put aside $2,000 per year per child. These funds can help pay for elementary, high school, or college education expenses.
- Mutual Funds. Mutual funds are a portfolio that a group of people contribute money toward. They could be made up of stocks, bonds, or other investments. Each investor buys shares of the overall portfolio and those shares pay dividends. This is a popular choice for beginners because the mutual funds are managed by a professional. You can decide how conservative or aggressive to be and your mutual fund manager will handle the rest!
- Retirement Planning: 401(k) and 403(b). Employers and financial institutions can help you save for retirement with 401(k), 403(b), or other retirement plans. These plans allow people to contribute money from their paychecks to help save for retirement later in life. Many companies offer 401(k) plans to their employees. Each program is different, so learn the details of the offer before you make any decisions. Teachers, administrators, and other public-school employees may be eligible for 403(b) plans that offer tax-deferred savings growth and compounding.
Get Started
Investing doesn’t have to be overwhelming, I hope this investing for beginners article has been helpful. A financial advisor can help you create a personalized long-term savings plan that works for you. If you’re ready to take the next step with investment services, retirement planning, or wealth management, Alltru Credit Union can help.
Until next time,
Chelsea Springli
