What investments are best for beginners?

What investments are best for beginners?
Raise your hand if you’ve experienced analysis paralysis when it comes to investing? Definitely been there, done that.....for years!

Open an account? Sure, easy peasy.

Transfer money from bank account? Done.

Choose investments? BAIL, BAIL, BAIL! hahah Just Kidding.

I get it, the actual act of selecting what to put your money in can be intimidating but it doesn’t have to be!

Since I’m not a financial advisor and I don’t know your specific situation, I can’t tell you what you should invest in but here’s what you can look for when beginning:

1. Low cost index funds will save you money and allow you to diversify your funds all in one spot. They are an easy, hands-off way to invest in the stock market. This is what took the scary out of investing for me.

Index funds track various indexes and are made up of stocks that mirror the companies performance - like the S&P500. 

Low cost index funds are inexpensive because they are automated and designed to follow the shifts in value of an index.  Because these funds are not actively managed by a well paid team of analysts, they don't cost the investor as much. Winning!

For example, the average annual expense ratio for stock index funds in 2016 was .09% while the average annual expense ratio for actively managed stock funds was .86%. Now you might be thinking "that's not a huge difference", but over time this adds up and will take away from what you're able to earn on your investments.

The S&P although wildly popular, isn't the only index fund in town. You can select various index funds based on the categories of stocks the house. There are index funds based on size of companies, funds based on geographical area, the type of businesses they include, domestic versus foreign, and even by market opportunity.

Remember, not every index fund is low cost.

2. Look for funds that have low investment minimums or zero minimums. Sometimes the minimum required to invest can be a few thousand dollars to start.

3. Don’t pay someone to do this for you just because you’re a newbie. You can totally learn how to invest! And the great thing is, you can learn as you go and adjust accordingly.

4. Average return rates over time. For example, the VTSAX has returned an average of 8% since it’s inception. The VFIAX, 7.93%. But these are just examples and you can easily pull these statistics up on any investing platform or even by throwing it into a Google search. 

5. Consider how much time you have. The younger you are, the more risk you can potentially take (but don’t have to). With that being said, this is even more of a reason just to start now. The earlier the better and the more time your investments have to grow, the more compounding interest works for you.

And remember, investing is a long game. There may be dips over time but historically you can track funds to see their overall growth. Don't get scared if you see a decrease in earnings, as long as you're not very close to retirement, you have time to ride it out. It will come back up.

Most importantly, pick one and start! You can learn more as you go and adjust as needed. You’ve got this and I believe in you.

For more details, grab my free guide 
“Investing for Beginners” 

xoxo,
Gwen