Investing Made Easy: A Beginner’s Guide to Building Wealth

If you find the thought of investing intimidating, you are selling out. You don’t have to be rich or a financial whiz to become an investor. You just have to be willing to learn and committed to investing for the long term. Over time it will get easier and before long you will feel like an old pro.

1. Create an emergency savings account

Not to put it too much, but building an emergency savings account is an investment for you. With no money in an emergency savings account, you may find yourself forced to pull out a high-interest credit card or take out a personal loan to cover the costs of an emergency. One of the few interest-free ways to pay for an emergency is to borrow the money yourself.

Ideally, you’ll want to have enough money in the account to cover three to six months of expenses. If you’re not sure how long it will take to keep your family alive, check this out emergency fund calculator.

2. Open a high yield savings account

A high-yield savings account is a great way to save for a down payment, wedding, or memorable trip. And right now, it’s also a great place to stash your emergency savings. Financial institutions offer surprisingly attractive APYs. While banks can change their interest rates at any time, now is a great time to put your money to work for you.

3. Open a brokerage account

Typically, there are no fees associated with opening a brokerage account and you are free to invest any amount available. Brokers give investors like you access to things like stocks, ETFs, and index funds to build a long-term relationship. Chances are that one day you will have more money to invest and a broker would be happy to partner with you.

The easiest way to get started is to visit the sites of top notch broker for beginners. Look around each page to determine which:

• It has an easy-to-navigate site and doesn’t leave you feeling overwhelmed.
• It provides educational materials in plain English.
• It offers commission-free trading.

4. Build a retirement account

If you think you have too little money to start saving for retirement, think again. Right off the bat, here are three places that will welcome whatever size of investment you can handle:

• 401(k): A 401(k) is a great investment vehicle for a beginner because it is professionally managed. Also, because the money is taken out of your paycheck before taxes are paid, you’ll invest the money tax-free and pay no taxes until you’ve withdrawn the funds. If you’re interested in a 401(k), talk to your company’s Human Resources department to learn more about the details. And if the most you can afford to contribute right now is 1%, that’s fine. You can increase your contributions over time.
• Traditional IRA: There is no minimum to open an IRA, making it an excellent option if you’re working on a budget. Like a 401(k), a traditional IRA is pre-tax funded, which means you won’t pay taxes on the money until you withdraw it. With big names like Merrill, Fidelity, Charles Schwab, and Vanguard offering IRAs, it’s easy to get started via their online sites.
• Roth IRA: A RothIRA is funded with after-tax dollars. Since you’re paying tax on that income now, you won’t have any taxes owed when you withdraw it in retirement. If you want to invest in a Roth IRA, there are limits on how much you can earn each year and how much you can contribute.

5. Buy fractional shares

As of this writing, shares of AutoZone Inc. (AZO) closed at $2,565, for a single share. A share of Chipotle (CMG) is worth $1,940. He’s rich enough for anyone’s blood. But if you’ve researched any of these companies and believe they’re on the right track, you can invest by buying a fractional share.

A fractional share of stock is like a small slice. Let’s say you have $100 to invest and use it to buy a fractional share of Chipotle stock. This means you own 0.05% of a share. While that doesn’t sound like much, your fraction of a share allows you to cash in on Chipotle’s profits.

Our the best online brokers and trading platforms make it easy to open an account and get started.

No matter how much or how little money you may have to invest right now, everything that goes into your account has the potential to transform from a tiny acorn to a mighty oak tree over time.

Summary

Investing can be intimidating, but it doesn’t have to be. With the right mindset and a willingness to learn, anyone can become an investor and start building wealth. Here are five steps to get you started:

1. Create an emergency savings account to cover unexpected expenses.
2. Open a high-yield savings account to maximize your savings.
3. Open a brokerage account to gain access to a variety of investment options.
4. Build a retirement account, such as a 401(k) or IRA, to secure your future.
5. Consider buying fractional shares to invest in individual stocks.

Remember, investing is a long-term commitment, and it’s essential to do your research and seek guidance when needed. By taking these steps, you can begin your journey toward financial freedom and pave the way for a more secure future.

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