INVESTING IS one of the most effective ways to prepare for retirement. As business development professional Fahim Imam-Sadeque explains, it’s a proven way to make your hard-earned money work for you.
However, if you’ve never invested before, it can be challenging to understand where you should start. If you want to get into the investing game and start planning for retirement, follow the six simple steps below.
- Why Are You Investing?
The first step is defining why you are investing. Then, you can work backwards by understanding the endgame and choosing the right accounts and strategy.
For instance, if you’re saving for retirement, you might consider certain tax-advantaged accounts. On the other hand, if you’re investing for quick returns, you might opt for different stocks and accounts.
Typically speaking, if you’re trying to save for retirement, you want to choose a type of account that provides you with the most choice in investments and the most advantageous type of account from a tax perspective based on your location.
- How Much Do You Want to Invest?
Next, figure out how much you want to invest. You can again work backwards from your goal to see how much you would need to invest to get there. Plenty of online tools can help you see how much you’d need to set aside every month to reach your retirement goal, based on your age and your nest egg goal.
If the initial figure seems unreachable, don’t worry. Start somewhere and build up your savings over time. Then, come up with a budget for how much you will set aside for your investments each month so that it becomes clockwork, like paying a bill.
- How Do You Want to Invest?
Do you want to be a hands-on investor? Or would you prefer to be more hands-off?
If you want to be directly involved in your retirement investments, you should opt for a brokerage account that allows you to choose your investment types. This would allow you to invest in stocks, mutual funds, bonds, and the like – and make changes whenever you want.
If you want to be more hands-off, you could opt for a robo-advisor. You tell the brokerage your goals, and they will build a personalized portfolio for you to achieve your investment goals.
- What’s Your Risk Level?
Investing is typically broken down into three main categories – low risk, moderate risk, and high risk. They’re self-explanatory, too.
Low risk means a lower likelihood that your investments will lose money, but not as big of an opportunity for a considerable increase. High risk is the opposite – the chance for big payoffs but a bigger chance for more significant losses. Moderate risk is somewhere in the middle.
You should choose your risk profile based on your age – the younger you are, the riskier you can be – and your overall tolerance for investing risk. This can help determine what investments you choose.
- What Do You Want to Invest In?
Do you have particular companies or industries that you want to invest in? Would you prefer a more generalized fund that invests in a diversified portfolio?
There are many choices when it comes to investments. First, decide whether there’s something specific you want to invest in or if you’d rather pick funds based on diversification and overall performance.
- Can You Be Patient?
One of the most critical parts of investing for retirement is understanding that you’re in it for the long term. As Fahim Imam-Sadeque explains, you don’t need to check the performance of your portfolio every day, every week or even every month.
A quarterly, bi-annual, or even annual check-in to ensure your portfolio is appropriately balanced will suffice. Don’t fret about changes in the short term. Your goal is to build long-term wealth.
About Fahim Imam-Sadeque
Fahim Imam-Sadeque is a business development professional with proven experience in the asset management industry. He has a Bachelor of Science in Actuarial Science from the City University of London and is a Fellow of the Institute of Actuaries. Fahim’s top skills include asset management, hedge funds, investment management, sales, and consultant & client relationship management.
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