Learning About InvestingIntroductionStocks, bonds, mutual funds, annuities and more. Find out how and where you can invest.
There are so many ways in which to invest your money: bank products, alternative investments such as stocks, bonds, mutual funds, and annuities. And there are so many places to put your money: 401(k)s, IRAs, brokerage accounts, credit unions, and banks. What's right for you? Well, there's a good financial planning answer to that question. It depends.
There are four main things you need to think about before you can decide how to invest your money:
LIQUIDITY NEEDS. How much money do you need to set aside for emergencies and other short-term goals?
GOALS & OBJECTIVES. What are you trying to accomplish? Do you want to retire early, send the kids through college, buy a house, or simply put some money away for a rainy day?
TIME HORIZON. How long will it be until you need your money?
RISK PROFILE. How much market risk can you tolerate and still be able to sleep nights?
Fund Your Retirement Plans
You may want to make sure you are investing in your retirement plans first, after your liquidity needs are met. Other investments should come after that. Your financial security is important and saving for retirement should be one of your primary needs. In addition, there are tax benefits associated with retirement plans that are not available elsewhere.
Other investments are available for those who have enough money left over after they fund their tax-advantaged retirement plans.
Retirement First
Step 1: Make sure you are sufficiently funding retirement plans that have tax advantages associated with them such as 401(k) plans, deductible and Roth IRAs, Keoghs and SEPs.
If you have any money left over, go to Step 2.
Step 2: Start funding other investments.
Why Retirement Plans Should Be Your Priority
| Retirement Plans* |
Other investments |
| The investments you make toward most retirement plans are tax deductible.** These investments and the interest and gains they accrue are not taxed until the money is withdrawn. |
The money you put in other investments is not tax deductible. |
| The income earned in most retirement plans is not taxed until you make a withdrawal.** |
The income earned on your other investments is normally taxed currently. |
| Having your financial security funded gives you peace of mind. |
If you are funding other investments rather than your retirement plans, not only are you giving up tax benefits, you may be putting your own financial future at risk.
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* 401(k)s, IRAs, Spouse’s 401(k) plans, Keoghs, etc. ** Contributions to a Roth IRA are not tax deductible, however qualified withdrawals are tax-free. To qualify, the IRA must be held 5 years and withdrawals begin after age 59 1/2 or due to death or disability.
How Much Money Do You Need To Start Investing?
Some mutual funds will let you open an account with as little as $100*. You can start very small. If you want to build a diversified portfolio, you will want to put money into a number of different funds. You can do that with as little as $5,000. *
* See specific fund company for minimum investment amounts and details.
Don’t Agonize... Get Active
The purpose of this section is to help educate you and try to eliminate the confusing nature of investing. We’re going to talk about the choices out there and what they mean for you. But our main goal is to get you started on the road to investing wisely.
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