NewsThe Ultimate Guide for Beginners to Dive into Investing, According to Financial...

The Ultimate Guide for Beginners to Dive into Investing, According to Financial Experts

A Simple Approach for Novice Investors

Getting started with investing can be intimidating, leading many Americans to avoid taking any action. However, investing doesn’t have to be complicated. In fact, financial experts suggest that starting can be straightforward and accessible to everyone.

“You don’t need to be a genius. Investing is not about intelligence; it’s about making smart decisions,” remarked Warren Buffett, the renowned chair and CEO of Berkshire Hathaway.

Investing is crucial for individuals looking to grow their savings and secure their financial future for retirement. Starting early in one’s career is advantageous due to the extended time for interest and investment returns to accumulate.

While personal long-term financial goals may vary, a general guideline is to have savings equal to 1x your salary by age 30, 3x by 40, and ultimately 10x by 67, as advised by Fidelity Investments.

An Excellent Option for Novices – Target-Date Funds

For individuals new to investing, target-date funds (TDFs) serve as a straightforward entryway into long-term investment strategies, according to financial experts.

“I believe they are an excellent, uncomplicated solution for both beginner and experienced investors,” noted Christine Benz, the director of personal finance and retirement planning at Morningstar.

Target-date funds are based on an investor’s anticipated retirement year. For example, a 25-year-old looking to retire in about 40 years could select a 2065 fund.

These mutual funds handle most of the intricate work for investors, such as rebalancing, diversification across various stocks and bonds, and determining an appropriate level of risk.

As investors age, asset managers adjust the TDF by reducing stock exposure and increasing bonds and cash allocation to lower risk.

Selecting a Suitable Target-Date Fund

For individuals who prefer a hands-off investment approach, TDFs are an ideal choice, especially for “do nothing” investors, according to Lee Baker, a certified financial planner and founder of Apex Financial Services in Atlanta.

Investors only need to choose their TDF provider, target year, and investment amount.

Benz suggests opting for a TDF that utilizes underlying index funds. Index funds aim to mimic broad market returns, are cost-effective, and typically outperform actively managed funds in the long run.

“It’s crucial to choose a passive TDF,” emphasized Carolyn McClanahan, a CFP and founder of Life Planning Partners in Jacksonville, Florida.

Benz also recommends selecting funds from leading TDF providers like Fidelity, Vanguard Group, Charles Schwab, BlackRock, or T. Rowe Price.

Alternative Options for Novice Investors

Investors who prefer to have slightly more control over their investments relative to TDF investors can explore other straightforward alternatives.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Subscribe Today

GET EXCLUSIVE FULL ACCESS TO PREMIUM CONTENT

SUPPORT NONPROFIT JOURNALISM

EXPERT ANALYSIS OF AND EMERGING TRENDS IN CHILD WELFARE AND JUVENILE JUSTICE

TOPICAL VIDEO WEBINARS

Get unlimited access to our EXCLUSIVE Content and our archive of subscriber stories.

Exclusive content

Latest article

More article