Different Ways to Start Investing Today

Have you thought about investing, but don’t know where to start? You have a number of choices as an investor, and the investments you choose have a big impact on how much money you can accumulate.

Many investors use mutual funds.

Start with mutual funds

Thousands of people start investing with mutual funds. A mutual fund pools money from investors and purchases stocks, bonds, and other investments. Investing in a fund allows you to buy a portfolio that contains dozens of different securities. 

Funds reduce the risk of losing money due to a specific stock or bond declining in value. Let’s assume that you want to invest in technology stocks. Rather than purchase stock in one or two companies, you can buy a mutual fund and diversify your investment into many different stocks.

Mutual funds can be bought and sold any day that the markets are open, and the minimum investment to start an account may be as low as $500. You can purchase a fund to meet any type of investment objective (growth, income, etc.).

Fully fund a retirement plan

Both self-employed people and employees can invest in retirement plans, such as a 401(k) plan. Retirement plans allow you to defer any taxes due on earnings until retirement. You can purchase individual stocks and bonds, or mutual funds.

Say, for example, that a mutual fund pays you $100 in dividend income on stocks in the fund. If the investment vehicle is a retirement plan, you can reinvest the $100 and defer paying taxes on the earnings until you reach retirement age.

You can start taking retirement plan distributions without penalty at age 59 ½. The IRS requires you to start taking required minimum distributions from a retirement plan at age 72. When you take distributions, you pay tax on the accumulated earnings in the plan.

Once you fully fund a retirement plan, you can invest additional dollars in a separate investment account.

Moving to taxable investment accounts

You may have stocks, bonds, and other assets in accounts with a financial advisor. These may be taxable accounts, and you pay taxes on interest income, dividend income, and capital gains each year. Since these accounts tax your earnings each year, you should maximize retirement plan investments first.

Explain how your assets should be distributed at death by creating a last will and testament.

Use a last will and testament

The last will and testament, simply known as a “will,” is a legal document that contains provisions for what to do with your estate after your death. The person drafting the will — otherwise known as a testator — chooses an executor to carry out the directives in the will during what is known as the probate process.

A last will and testament is an essential part of your estate planning- making sure your assets are distributed properly among your beneficiaries. It legally protects your spouse, children, and your assets. The document states exactly how you want your property handled after you pass away.

Investing in your business

If you’re self-employed and sell your business, the sales proceeds can be invested to generate more retirement income. However, if you continue to manage a business when you reach retirement age, use the tools at Form Pros.

Form Pros provides intuitive forms that ask the right questions, so you can create documents quickly, and at the fraction of the cost of hiring a lawyer. We offer expertly customized business and tax forms, real estate contracts, and personal contracts.

What is your biggest investment challenge?