How to Invest Your Money in 5 Easy Steps

Written by Carly Simon-Gersuk

Learning how to invest your money may seem daunting, but it does not have to be the case. In fact, it can be easier than it seems and you can start no matter how much you have saved. Here are 5 easy steps to get you on your way to investing toward your future financial goals, whether it is to build wealth or save for retirement.

1.Decide what approach you want to take: do-it-yourself or manage it for me

When deciding on your approach to investing, it is important to know when it is best to have a financial advisor and when it may be better to use a different investing platform. People may decide to seek real financial advice from a face-to-face advisor when they have more money to handle. Having a financial advisor also gives people the option to not have to do any work and allow the advisor to hand all the investments. Of course that comes at a higher price for the assistance.  Other people, regardless of how much money there is to handle, may choose online platforms. Online advisors use computer algorithms and advanced software to manage investment portfolios and automate taxes. 

On the contrary to having your investments managed by others, people also like to do-it-yourself. By utilizing online resources, discount brokers and investment account platforms, investors have the ability to build and manage their own portfolios. Remember, there are plenty of approaches you can use for your investments and you can change what management approach is better for you at any time. 

2. Identify your financial goals and when you will need the money you plan to invest

After deciding on your approach, you need to determine your investing goals and when you would like to achieve them. Your investment goals can be broken down into long-term and short-term. Long-term goals are those that are met several years in the future (such as retirement funds or down payments for a house) and allow you to grow your portfolio. Whereas short-term goals give you access to returns sooner (such as vacation or emergency funds). Keep in mind that it is also possible to invest with no specific goal but to increase your wealth, whatever amount it may end up being and at any time you decide to collect the funds.

3. Pick the type of investment accounts you will use

401K, IRA, taxable brokerage account, and education investment accounts. There are plenty of options to choose from for your investment account(s) that will accommodate your goals, investing style and ownership. Retirement funds, such as IRA (individual funds from broker or bank) and 401K (company offer and match fund in the account), have valuable tax benefits. It is possible to contribute to both these accounts at the same time. Taxable brokerage accounts, also known as non-retirement accounts, provide access to a broad range of investments, including but not limited to stocks, mutual funds, and bonds. These investments can be subject to taxes in years that money is received via gains or sales. Education investigation accounts are commonly used for college savings and educational expenses. These types of accounts, like retirement accounts, offer tax perks. 

4. Open an account

Once you have done some further research and decided which account(s) you want, it is time to choose an account provider. Two major provider options are an online broker or a robo-advisor. An online broker gives you more control on your account to self-manage, buy and sell investments. A robo-advisor uses computer programs to do most the work for you to build and manage your portfolio. To help you decide between the two you should compare costs and incentives, and consider services. Then look into what broker will grant you the access you want, whether it is for research, foreign trading, fractional shares or trading platforms, just to name a few. The last two steps to then open your account is to fill out an application and transfer funds.

5. Choose investments that match your tolerance for risk

Now that you have opened a brokerage account it is time to invest. It is important to responsibly choose stocks, bonds and funds to create your portfolio. These choices should depend on your goals and ability to take risks in exchange for the potential of higher investment rewards. A financial advisor can help you assess your risk tolerance by gauging more on how concerned you are with losing money, market declines, and other various scenarios/stresses you may have. Additionally, consider investing in a diverse range of companies, areas and even company sizes. Diversification is important for your portfolio as different assets respond to the market differently. 


Written by Carly Simon-Gersuk