How Do I begin Investing?

This a question I get a lot from many millenials. The idea of investing can sound intimidating if you don’t have any experience; however, there are several ways to begin investing. Today we’ll be focusing on three different ways you can begin investing today. (Roth IRA, 401k, and stocks)

Roth IRA

A Roth IRA is an individual retirement account that has many tax advantages. Roth IRA’s allow individuals to invest after-tax money and allows individuals to contribute up to $6,000 every year. Investing after-tax money allows your money to grow tax free and the earlier you begin investing the more you can take advantage of compound interest. One disadvantage of the Roth IRA is you can’t take advantage of your tax free growth until the age of 59. If an individual accesses their money in a Roth IRA they may be penalized.

401k

A 401k is a company-sponsored retirement account. Some companies offer 401k plans, but not every company does. It is important that you understand if the company you work for offers a 401k plan because many companies will provide a small percent match on what you contribute. This means your company will double a small amount of the money you contribute. Unlike the Roth IRA the 401k allows individuals to invest up to $18,000 per year and if you are over 50 you are allowed to invest up to $24,000 per year. One downside of the 401k is that you are limited to fewer investment options.

Stocks

A stock is a small percentage of company. Investing in stocks can be tricky because there are a myriad of stocks to invest in. With the technological advancements we have today it makes investing in stocks a lot easier than it was decades ago. Today, you can simply invest from your phone. A few apps to consider to get started investing in stocks are Robinhood, M1 Finance, and WeBull. These three apps let you pick which stocks you invest in. Unlike the Roth IRA and 401k individuals aren’t penalized for withdrawing their funds; however, picking individual stocks can be considered the most risky of the three.

Conclusion

In conclusion, you should do your own research before you begin investing to provide yourself the best advantage to allow your money to grow. Depending on your age and your financial situation should impact the investing choices you make.