Investing, a topic we all know about and love to discuss, but when it comes to execution most fall a bit short of expectations. For some, it’s waiting too long into their life to properly save money and for others it’s continual poor investment decisions that have put them into financial hardship. Television outlets and popular websites make investing seem intimidating and that you need professional assistance to build the best portfolio. While they may be right, many aspects of investing are easily simplified and can be figured out on your own.

Everyone’s investing objectives are different. However, there are commonalities that everyone likely shares and tips you can utilize in building your portfolio. Should you have any specific questions it certainly is a responsible decision to speak with an investing professional, but in the meantime, let us go over a few actionable ideas you can take with you.

How to Invest Wisely

The first and most broad question is how to begin investing. Simply beginning the ‘search for information’ process will open your horizon to the hundreds of possible investment options on the market. From there, you will gain exposure to what fits your needs best and you can construct a portfolio that’s tailored to you. In this section of ‘how to invest your money’, we’ll detail three different accounts you can utilize to invest your money.

401(k) Plan

First on our list is the popular 401(k) plan. Many employers offer their staff a 401(k), which is a pre-tax retirement vehicle used to help you save for retirement. Pre-tax means that you will not have any of your income withheld from your paycheck while you’re working and you will instead have to pay taxes when you make distributions during retirement. You may also have the ability to utilize the tax benefits of a Roth 401(k), which is the opposite and is constructed using post tax dollars. Many people prefer this method because it allows your income tax to be withheld from your paycheck during your working years so that when you take distributions during retirement you don’t owe anything. A 401(k) is an employer offered, qualified retirement plan and cannot be opened elsewhere.

How you begin investing in a 401(k) plan is extremely simple, beginning with your deduction amount. When selecting how much to contribute towards your 401(k), you typically select a percentage of your paycheck. If you’re lucky, your employer may offer a match up to a certain percentage, which is free money.  This can be updated at any time should you decide to contribute a different amount.

From there, your plan has a predetermined selection of investments products you can invest your money in. You will likely find target date funds, index mutual funds and a few other alternative investments to add some spice to your portfolio. Should you have any detailed questions you can always ask your plan administrator.

In 2019, your contribution limits are $19,000, which is an increase from $18,500 in 2018. Learn more about 401k plans here. 

Individual Retirement Accounts (IRA)

The next vehicle on our list is an individual retirement account, or IRA for short. An IRA works similar in that you can select a vanilla IRA or Roth IRA, depending on your tax needs. However, the main difference is nearly anyone can open an IRA if they meet the income requirements, which depend on marriage and a couple other factors.

Another difference between an IRA and a 401(k) plan are the investment selections. In an IRA, you have a much wider selection of investments you can choose from, enabling you to create a more diverse portfolio. Your investments can include stocks, bonds, options and many other investment types.

In 2019, the contribution limits for an IRA are $6,000, up from $5,500 from the year prior. Learn more about IRA plans here.

Brokerage Account

The last account you can utilize to invest is a brokerage account, which is an investment account that carries no special tax privileges, and anyone can open. There are no contribution limits and your investment options are vast. You can choose to invest in anything your broker allows, but you may incur tax consequences that vary, depending on your investment portfolio.

Investment Options

Now that you know how to invest your money it’s time to review a few products you will likely encounter through your due diligence.

Mutual Funds

The first and among the most popular is a mutual fund. A mutual fund is an asset that is built though a basket of stocks. With a mutual fund, the goal is to follow an index or market, giving you exposure to the broader market. You’ll likely find various mutual funds in your 401(k) plan as these investment products are designed for long-term, passive investing.

Also, with a mutual fund you will notice an expense ratio, which is the annual cost of investing in a mutual fund. The lower you keep the expense ratio the more money you are retaining to invest.

Exchange Traded Fund (ETF)

Similar to a mutual fund, an exchange traded fund or ETF is traded on the open market similar to a stock. ETF products are more liquid than a mutual fund, meaning you can sell the asset quicker. Like a mutual fund, ETF’s have expense ratios and charge you on an annual basis. ETF products range from index tracking to inverse market directions.

Vanguard has great depth analysis of ETFs vs mutual funds. Read their article here.


Last on the list of options are stocks. These are the most popular and well known. Purchasing a stock gives you ownership of a company, thus granting you access to participate in the upside or downside value. Stocks can be held long-term or short-term, and well-off companies tend to pay their shareholders dividends. Stocks can increase the volatility of a portfolio, as well as the returns.

Know these data points will not only give you the ability to start investing, but you will also have confidence going into a conversation with your investment advisor. Investing early and investing often will allow your earnings to compound, slowly growing and building wealth you can pass down from generation to generation.


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