Intro to investing: How to get started

Investing for the first time is a significant milestone for anyone. But, one of the largest hurdles perspective investors face is that they want to start, but don’t know where to begin. There’s so much information and opinions surrounding the topic of investing that it can feel downright overwhelming.
Before throwing in the towel, prospective investors should be aware of several easy access ways to start investing. This article dives deeper into a few of these options in an effort to educate those who want to start investing.

Retirement Plans:
One way to get started investing is through a retirement plan. Many future investors are employees and have access to an employer-sponsored retirement plan. They are all savings and investing plans offered (and sponsored) by employers to provide a tax advantaged way to set aside, and invest with, money for retirement. Each company is different though, so it’s important to speak with the plan administrator to understand the investing options. What’s most important is saving for retirement. As the money is already set aside to grow for retirement, it is a good source of funds with which to start investing.

Other Methods:
Another way to start investing is to invest directly through a taxable investment (and not through a tax-deferred retirement plan) .

Brokerage accounts:
A brokerage account is an account opened at a licensed brokerage firm through which an investor can buy and sell (i.e., trade) investments; typically stocks, mutual funds and bonds. There are different kinds of brokerage accounts so investors should decide what is important to them and/or what they are willing to pay for. Things to consider with respect to selecting a brokerage account: Full-service or managed brokerage account. These brokerage accounts come with an investment manager. That investment manager could be a human being or could be robo-advisors which create portfolios for investors using algorithms based on set risk profiles and investment goals; by removing the human element it not only lowers fees but allows for people to create truly unique portfolios based on the type of risk they’re willing to take on. Deciding to go with one of these accounts comes down to how much guidance the investor desires, needs or wants and/or willing to pay for. Although there are fees associated with having a professional manager, it does help a new investor get started knowing as there would be a professional investment manager helping with investment decisions and/or for investors who prefer to be completely hands off. Online or discount brokerage accounts. These online platforms allow investors to purchase and trade on their own without going through a broker/manager. Some investors may have stock they already know they want to try investing with so why pay the fees for a managed brokerage account. Fees. Various fees could be applicable and range from fees for having an account at that brokerage firm, fees based on account balance levels held there, extent of management provided, number and/or frequency of trades. Fees and commissions can vary widely so be sure to compare them among the various brokerage firms. Investment Opportunities. Not all brokerage firms offer every type of investment. If there is something of particular interest, make sure it is available through that brokerage firm. Most allow for investments in listed common stocks, bonds, money markets and certificates of deposits, mutual funds, and exchange traded funds. Some will allow for other investment vehicles such as non-listed REITs, master limited partnerships, limited liability companies and/or limited partnerships (hedge funds). Education. Brokerage firms (especially the larger ones) often provide access to information about potential investment and educational pieces about various trading vehicles and strategies. Having a nice organized library of resource material could be very beneficial to new investors.

Direct Investment:
One method of investing in stock is buying stock directly from the company and not through a broker. The possibilities range from certain “blue chip” stock (through their direct stock participation programs), public non-listed REITs, private corporations and/or private placement offerings. Note that depending on the investment, there may be financial suitability requirements to be met before the investor is allowed to invest in that product. Some investments may be sold only to accredited investors. However, with the advent of crowdfunding, non-accredited investors are now allowed access to certain investments previously available to only accredited investors. Crowdfunding is a method of raising money through the collective efforts of a pool of individuals which and has allowed industries to capitalize on a new means of raising capital to launch developing projects and investment vehicles. This opened up a new world of possibilities for the real estate industry in particular as many investors can now pool their funds to invest in a particular building or real estate project. Real estate crowdfunding platforms began popping up and for the first time, investors had direct access to various real estate investment offerings via digital devices. Plus with a lower entry into real estate barrier, it allowed for just about anyone to participate in real estate.

Bottom Line:
Making your first investment can be overwhelming, but understanding the above can provide a way for prospective investors to start learning the ropes. Even a small investment could grow into something substantial over time. The key is to start. So, what are you waiting for?

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Disclaimer: This information is for educational purposes only, and is not intended to represent investment, tax, or other financial advice. Please consult a qualified tax professional regarding the applicability of the above to your personal situation and the specific requirements and limitations of the above.

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