Financial Advisors Agree: These are the 3 best investing tips for beginners - CNBC | Jewelry Dukan

More than half of US households have some exposure to the stock market, according to the Pew Research Center. While only a small fraction of American families (14%) invest directly in individual stocks, Pew found that 52% participate in the market through their retirement accounts.

Investing can help you maximize the amount of money you can make, allowing you to grow your wealth and have greater financial security as you enter your retirement years. However, if you’re new to investing, there are a few things you should know before diving into the stock market.

Below, CNBC Select shares three tips for any beginner just starting out.

1. Check your finances before you even start investing

Before you take the risk of investing your money in the stock market, you should first have a plan and feel financially stable.

Douglas Boneparth, CFP based in New York City, President of Bone Fide Wealth and co-author of The Millennial Money Fix, offers the following guidelines to consider before getting started:

  1. Identify your financial goals: Most likely, you’re investing because you want to start putting money aside for retirement. Whatever your goal, Boneparth argues, the first step is to identify it and then quantify it. “When do you want to reach them and how much will they cost?” Finally, prioritize your goals based on importance and urgency to you. Which goal do you want to work on first?
  2. Understand your cash flow: It’s important to know how much money you’re making and how much you’re spending each month. That way, Boneparth adds, your savings — and ultimately your investments — are consistent.
  3. Do you have an emergency fund: Make sure you have a cash reserve that you can easily access before putting any money on the market. This is cash that you can draw on when you need it, e.g. B. if you lose your job or have to finance unexpected expenses. “The whole point of investing is staying invested,” says Boneparth. “No one wants to sell early because something comes up that would require breaking the strategy.”

High-yield savings accounts that are FDIC-insured are great for building an emergency fund. Since they are not subject to market fluctuations, they are risk-free, so you can rest assured that your money is always there.

These accounts offer higher interest rates than traditional savings accounts, allowing you to earn more over time. Check out Synchrony Bank High Yield Savings if you want easy access to your cash, or Discover Online Savings Account if you’d rather do all your banking in one place.

2. Use retirement accounts as much as you can

There’s a reason the majority of Americans participate in the market through their retirement accounts: It’s a low-hanging fruit if you want to invest.

“[Retirement accounts] will provide tax benefits as well as an easy way to contribute,” says Shon Anderson, an Ohio-based CFP and senior wealth strategist at Anderson Financial Strategies.

If you have access to a company pension plan, such as B. 401(k), ensure that a portion of your paycheck is automatically invested in the account each pay period. The ideal contribution level is between 15% and 20% of your gross income, but do what works with your budget and income level. For those whose employers offer a 401(k) match, make sure you contribute enough to achieve the match. Otherwise is the free money you leave behind.

For employer-sponsored plans, Anderson suggests checking to see if the 401(k) offers funds at the effective date to help you get started. With an end-of-year fund, you choose a fund based on the year you plan to retire. For example, if you want to retire in 2050, you would choose a fund that is closest to the year 2050. As you approach your target retirement year, your fund will be rebalanced to reduce the number of riskier investments.

While the easiest way to invest is through your employer’s retirement plan, not everyone has access to one. If you’re in this boat, consider opening either a traditional or Roth IRA account so you don’t fall behind when it comes to saving for the future.

3. Know that you don’t have to be an expert

If you’re looking to invest beyond your retirement savings, there are many investment tools that can help.

“You don’t have to be a guru,” says Lauryn Williams, a Texas-based CFP and founder of Worth Winning. “You need to find an investment vehicle and focus on putting money into it.”

If you can’t follow the market closely, consider investing in a robo-advisor like Betterment and Wealthfront or a monthly membership service like Ellevest. These types of platforms and programs usually offer some consulting services, but you should also make sure you know any app, membership, or investment fees up front.

You can also get advice from a professional. “Even if you’re just starting out, some financial planners charge by the hour or have a monthly advance that might be within reach,” adds Scott Schwalich, an Ohio-based CFP and wealth strategy consultant at Anderson Financial Strategies.

Editorial note: Any opinion, analysis, review, or recommendation expressed in this article is solely that of Select’s editors and has not been reviewed, approved, or otherwise endorsed by any third party.

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