Here at Make Money Your Way, we’re all about making your money work for you, and not the other way around. Today, let’s have a look at investing options, and how you can build a relatively lazy portfolio, and just take care of it once or twice a month. Actually, I have read that it is not good to look at your portfolio every single day, unless you are a professional day trader. People make a lot of emotional decisions, and tend do sell too quickly, and hold onto losses for too long, if presented with the option to make decisions too often. That article from an investing company showed the portfolios of inactive customers, who hadn’t logged in in years, (some of them because they were dead!), were actually performing better than those of active customers checking in a bit too frequently.
Anyway, investing in the stock market brings higher returns over the long run than savings accounts, but it can be daunting at first, and very time consuming if you individually research every stock. One easy way to get started is to use an automated platform, also known as a robo advisor, that uses algorithms to make investing suggestions. A comparison of the top robo advisors will help you decide which one to go with. Read the reviews, here is a review of Wealthfront for example, which is one of the top robo advisors. You can decide to invest a lump sum or make regular contributions, every month or every quarter.
I like automated contributions, as the amount will be withdrawn automatically every month and send to your investing account. Having the money disappear every month ensures you do it, and don’t spend the amount elsewhere. Because the markets evolve, and can go down before they go up, you shouldn’t invest amounts you may need in the near future. That should be money you can afford to have in there for 5 years or more. Start small, with $50 a month for example, then increase your contributions as you earn more.
The advantage of robo advisors is their low fee. Most of them will charge you around 0.25% of the sums invested, while brokers will charge 1% or more. Over the long term, that makes a big difference on your nest egg. Just enter the numbers into a compound interest calculator to see how much of a difference 0.75% returns can make. We are talking thousands of dollars if you invest from age 25 to 65.
Because everything is automated, you can simply review and amend your strategy every quarter, or every year. Define the amount your are able to invest, and the level of risk, and you’re pretty much set. Investing doesn’t get easier than this.