Investing 101: How to Get Started

Those who are new to investing often find the subject quite daunting. Although there’s a sharp learning curve, it’s not challenging to begin investing. However, before dumping your money into a particular stock or bond, you’ll want to find the ideal asset allocation and learn about investment risk tolerance levels.

Here at Chunk, we give you the power to stay on top of your investments – without having to check multiple accounts. You can easily see how your investments are performing, your overall account balances, and asset allocation.

Are you ready to begin investing? Before you start, be sure to follow these steps:

Understand Investment Risk Tolerance Levels

Although riskier investments can yield higher returns, they can also cause you to lose a significant amount of money. If you’re nearing retirement or saving for an upcoming expense, then you can’t afford to see your investment accounts tank. Your risk tolerance evolves based on the following factors:

  • Age: As you get older, your risk tolerance generally decreases. When you’re younger, you have more time to recover from substantial losses.
  • Income: Those with a higher salary and more disposable income can typically put money in high-risk investments.
  • Goals: If you want to retire early, you might have to develop an aggressive investing strategy – including high-risk investments.
  • Long-Term Goals: Investors will need to increase their risk appetite if they desire a higher net worth.
  • Cash savings: It’s easier to stomach market downfalls when you have lots of cash in the bank.

Figuring out your risk tolerance level goes hand-in-hand with the next step: determining the amount to invest.

Decide How Much You Want to Invest

The general rule of thumb is that you should never invest more than you can afford to lose. It’s essential to have an emergency fund before you test your luck in the market. The money in your emergency fund covers the necessities – rent, utilities, food, insurance, and other bills. Most financial experts suggest saving six months of expenses in an emergency fund.

Once you have an emergency fund and disposable income, it’s time to invest. Industry professionals recommend that you invest 15% of your pre-tax income. This amount also includes any employer contributions, such as 401(k) contributions.

You should also consider the tax advantages of traditional IRAs and Roth IRAs. For example, you can invest $6,000 annually in a traditional IRA without having to pay income taxes. If you put money in a Roth IRA, you don’t have to pay taxes on gains if you withdraw the money five years after the first contribution and you’re at least 59 ½.

Open an Investment Account

If you’re employed full-time, then there’s a good chance that you already have a 401(k) or IRA through your employer. However, if you have maxed out those accounts or simply want to invest more, you can open a personal investment account. Note: many investment companies that offer personal investment accounts also offer IRAs, Roth IRAs, 401(k) plans, and UGMA/UTMA accounts.

Some of the most popular brokers that allow you to invest in stocks, ETFs, mutual funds, bonds, and more, include:

Pick Your Investments

You should choose your investments while keeping your risk tolerance in mind. The breakdown of your investments is your asset allocation. For example, if you’re just starting your career, your asset allocation might be 100% stock. As you near retirement, your asset allocation should contain risk-averse investments, such as bonds.

Many investors subtract their age from 100 to calculate the ideal asset allocation. Following this rule, a 40-year-old’s portfolio would contain 60% stocks and 40% of other financial instruments, such as bonds and CDs. It’s also essential to avoid investing in a single industry; diversification is critical. By investing in multiple sectors, you can circumvent extreme losses if a particular industry collapse. 

Standard investment instruments include:

  • Stocks
  • Exchange-traded funds (ETFs)
  • Bonds (municipal, corporate, and treasury)
  • Certificate of deposits (CDs)
  • Mutual funds
  • Index funds

Monitor Your Investments

Many people – especially those with conservative investing strategies – don’t monitor their investments. It’s a smart idea to monitor your portfolio every now and then, mainly if you invest in riskier financial instruments (i.e., stocks and ETFs). Those who stick most of their funds in a low-risk index fund may only need to look at their account balances once a month.

Here at Chunk, we give you all the tools you need to track your stock portfolio and virtually every instrument in your investment account. You can easily view your accounts’ overall balance and growth using our straightforward platform. With Chunk, you no longer need to log in to multiple investment accounts or maintain messy spreadsheets.

Ready to start your journey to

financial freedom?

Ready to start your journey to

financial freedom?

Ready to start your journey to

financial freedom?

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