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Three Low-Risk Investing Strategies for Beginners

Once an elusive idea, many people associate investing with the New York Stock Exchange’s flashing lights and fast pace. But now you can make investments from the palm of your hand. Apps like Acorns Investing and Stash allow users from any walk of life to invest as little or as much as they want.

As a newcomer to investing, you might find yourself distracted by the many options and wondering where to begin. We’re breaking down three baby steps to get you started down the road of investing.  

1.  Maximize Your 401K

Don’t roll your eyes! You may be thinking that you want to go beyond your 401K and take control of your money. But if you’re a beginner to investing, your 401K is a vital place to start.

Why? Because you want to make your money work for you, and that begins with being purposeful about where your money is going. Here are some questions you need to ask about your 401K:

  • Is my employer’s investment match worthwhile?
  • How much control do I have over where my money is going?
  • Am I comfortable with the level of risk associated with my 401K investments?
  • Will I stay with the company long enough to become fully vested?
  • Can I move my money to another account if/when I leave?

2.  Diversify and Flourish

As a beginner, investing in stocks may be at the top of your list. It’s key to branch out and put at least 25% of your money somewhere else. A good rule of thumb is to tackle higher risk investments when you are young while transitioning your funds into low-risk accounts as you age.

This strategy maximizes your earning potential in your early years while protecting your money as you get closer to retirement. Still, no matter where you are in your investment journey, you have to determine a comfort level with risk. Research other investment vehicles and test each one out to find your tolerance for risk versus reward:

  • Investment apps like Stash, Acorns Investing, Robinhood, Invstr and many more
  • Treasury notes, bills and bonds – all backed by the federal government
  • Corporate bonds issued by well-established corporations
  • Fixed annuities
  • Certificates of deposit and money market accounts
  • Stay in Control of Your Finances

This doesn’t sound like a strategy for investing, but it’s the most important one. For best results, investments should be made with longevity in mind – allowing your money to stay put without touching it for years, if not decades.

That’s why the penalties are so high for early withdrawals. If you find yourself in a financial bind and your only option is to take money out of investment accounts, you can wave goodbye to any earnings you’ve accumulated.

It is so imperative that you sustain a healthy savings account outside of your investments for emergencies and unexpected expenses. Similarly, it is important to maintain your credit and not get so deep in debt that you are paying more in interest than earning on your investments.

3. The Bottom Line

Investing is not do and done. Keep going once you’ve mastered these investing strategies. Stay abreast of the investing landscape and continue to nurture your thirst for knowledge. When it comes to investing, the more you know, the more you grow.

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