Are You Making Investing Too Complicated?

Laura answers a common question about how to start investing and which investments to choose.

Laura Adams, MBA
8-minute read
Episode #420

If you don’t have a workplace plan, open up an Individual Retirement Arrangement or IRA. They also provide a menu of investment options or suggest a portfolio based on your age or stated risk tolerance.

For a summary of the traditional and Roth retirement account rules, plus the best places to open one up, download the free Retirement Account Comparison Chart

Workplace plans and IRAs also come with an advisor or plan custodian who can help you choose individual funds if you aren’t sure what’s best for you. In general, getting your asset allocation right is far more important than the specific stock or bond funds you choose. But remember that if you make a mistake, you can change your asset allocation at any time.

Another key component to investing success is to choose low-cost funds. Fund fees reduce the growth in your account year after year. So look for mutual funds with fees less than 1%, or ideally less than 0.5%. If exchange-traded funds are on your menu, they offer many advantages including fees that may be far less than mutual funds.

How to Simplify Investing

To sum up, investing can be as complicated or as simple as you want it to be. If you want to do hours of research and spend time as a DIY investor, you can. But you can also open up a retirement account and simply choose funds based on how much stock you want to own.

There are even one-and-done funds called target date or lifecycle funds that are growing in popularity. They hold a pre-set amount of stocks and bonds based on the year you want to retire.

A target date fund owns many underlying investments and automatically updates your allocation on a regular basis so the fund is aggressive when you're young, but become more conservative as you get older. In other words, it owns fewer risky stocks and more conservative bonds as you approach your desired retirement age. It really doesn’t get any easier than that!

One of the most powerful ways to build wealth and financial security is actually pretty boring. Simply choose low-cost funds inside a retirement account and contribute 10% to 15% of your income over a long period of time.

Don’t get fooled into thinking that you have to take a lot of risk in order to be an investor. Of course, investing always carries some amount of risk. But you’re in control and can choose high risk, moderate risk, or low risk investments. It’s totally up to you.

If you're ready for help managing debt, building credit, and reaching big financial goals, check out Laura's private Facebook Group, Dominate Your Debt! Request an invitation to join this growing community of like-minded people who want to take their financial lives to the next level.

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About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.