Investing can help you reach your goals, improve your well-being, and focus more of your time and energy on what really matters to you. But the whole idea of investing can seem intimidating. Where do you even start? Ask yourself the following questions, and you’ll be on your way to mindfully planning your future.
1. What are my goals?
“Saving for a house” is a great beginning. But let’s get more precise. It’s important that your investment goals be:
- Specific and measurable: Commit to investing a specific amount during a specific period, like an extra 2% of your pretax paycheck to your 401(k) or IRA, or an extra $100 each month to your personal brokerage account.
- Achievable: If you’re 40 years old and want $1 million by retirement, you’ll need to invest more than $100 a month. Make your goal more realistic by resetting your expectations or increasing your savings rate. And revisit these goals as your life changes. Got a big raise at work? Maybe that $1 million for retirement will start looking more realistic if you can start saving and investing more.
- Enjoyable: You invest for your future peace of mind. But peace of mind matters today, too. Are your goals genuinely important to you? Are you putting too much into your investments, or working too hard for tomorrow without enjoying today? Ask yourself these questions to help you find the joy in investing—and remember it’s OK to spend on what brings you joy as long as you budget and do so responsibly.
Still have questions about setting goals? With Truist Invest, you have on-demand access to a team of financial advisors to help.
2. How much risk can I tolerate?
Being cautious with your money may be your first instinct—but when you invest, you might need to take some risks to earn enough to reach your goals.
Knowing where you fall on the spectrum of conservative (unwilling to tolerate any loss on your investments) to aggressive (willing to take on maximum risk in the hopes of bigger gains) helps you identify how much risk you can comfortably take on.
Generally, the further out your goals, the more investment risk you can afford to take. Good examples of longer-term goals could be retiring in 20 years or saving for your infant’s college fund. Shorter-term goals could include buying a house this year—or retiring within 5 years if you’re that close.
You can always lower your investing risk by rebalancing your portfolio over time, such as by transitioning more of your stock investments (more risk, more potential reward) to bond investments (less risk, less potential reward) as you get closer to life events like retirement.
3. What should I invest in?
When you’re just getting familiar with all those stocks, bonds, and mutual funds out there, it can be overwhelming. If you’re new to investing, simplify your options and consider exchange-traded funds (ETFs). They’re a popular way to get started because they’re generally less expensive and less risky than picking individual stocks or investing in other asset types.
When you buy a share of an ETF, you’re actually buying a bundle of stocks (or bonds) that can be traded just like individual stocks. With an ETF, you’re buying a small percentage of many different companies, which is an easy way to diversify and reduce the amount of risk you’re taking on. Some ETFs track major indexes like the S&P 500, Dow Jones Industrial Average, or Nasdaq, and others focus on specific industries like clean energy, telecommunications, or real estate. If you’re unsure of which ETFs to invest in, robo-advisors—online services that help you build and manage an investment portfolio with minimal human interaction—can be great resources to help you start your search.
4. What do I need to know after I start investing?
Remember that investing is a marathon—not a sprint. Even if you’re using a robo-advisor or automated investing service, check in at least a few times each year to see how your investments are performing and whether you’re on pace to reach your goals. If you’re not—or you’re just not sure—consider reaching out to a financial advisor or counselor for support.
If you do choose to invest primarily with a robo-advisory, there are some benefits you might enjoy. To start, they generally have lower fees than traditional investment advisors (i.e., people), and they’re becoming increasingly personalized. If you check in and find that you’re not on track with your goals, some robo-advisors can help you rebalance your portfolio or help with tax-loss harvesting.
When looking at your account statements, consider whether your needs or risk tolerance have changed. You may have already achieved past goals, set new goals, or experienced unexpected life changes that could prompt you to modify your investing strategy.