This is the beginning of the New Year, and you finally have some money to invest. Maybe you just got a raise. Or maybe the year-end bonus burns a hole in your pocket. Either way, if you want extra dollars to calculate, you need to invest wisely.
The problem is, you don’t know where to invest your cash. When you realize the countless investment options available, the overwhelming odds are overwhelming.
In the investment world, this is called “analysis paralysis”. You spend a lot of time analyzing your choices, and you give up on it and never invest. In the end, the extra cash you set aside will be consumed by bills or unexpected expenses. In other words, life happens.
You should definitely make four investments in 2018.
If you want to make sure that your extra cash doesn’t go away, you need to invest right away. If you can help you find the right investment choices for your goals, then a certain amount of analysis is fine, but you still need to take action.
With that in mind, I want to share the four best ways to invest in excess capital in 2018.
1: the stock market
Although “investing in the stock market” is some of the most basic advice you’ve ever read, listen to me. While everyone knows that the process of investing in the stock market has been a historic success, too many people don’t trust financial markets and choose to stay on the sidelines.
Then there are those who think that the stock market is so overvalued that they jump in wildly. But it’s true: no one tells you to put all the extra money into stocks. Instead, I suggest that you invest a small amount of money over time in a method called the dollar-cost averaging method.
The dollar-cost averaging requires that we invest our money in investments at any time. This could be 12 months. This will be 18 months. Well, maybe five years.
Colorado Jenkins’ financial adviser David Henderson, further explains the calculation method of average cost: $” when the market is high, you buy fewer shares, when buy more stock market is low, “he said. This means that over time, you will use this method to get a lower average share price. Obviously, it’s easy to see why this would be good.
Now that we’ve talked about the importance of investing in the stock market, let’s talk about where to invest your money. What are the best tools and vehicles we can use?
This is another option that is overwhelming. However, I usually advise people to wet their feet with mutual funds or etfs.
If you have a financial adviser who represents your work, they may be able to clean up the mutual funds that underperform active management. Otherwise, you can invest in index funds, which are not actively managed but have a rich history of return.
If you already have a brokerage account, you may want to stick with it. Otherwise, you need to find a new place to help you invest your money. One company I’ve been suggesting is Betterment. With Betterment, your money can be invested in etfs, and they will not charge you for managing these funds. In addition, they choose the ETF you invest in based on your preference for risk, investment objectives and other factors.
What does that mean? This means that you can invest your hard-earned money, then sit down and enjoy the rewards and make them work hard.
If you want to have more control over your investments, online brokerage firms like Ally Financial, TD Ameritrade and e-trade can easily manage with low fees and easy-to-use platforms. There are plenty of other “robo-advisers” to choose from.
Finally, there is a simpler way to invest in the stock market with less effort — thereby increasing your contribution to the retirement account supported by your work. Arizona financial planner Charles c. Scott says this may be your best bet – especially if you don’t have enough input to compete with your employer.
“Every dollar you contribute can match the dollar,” Scott said. “This is your 100% return on investment.”
If you don’t make the most of your 401 (k) or enough contribution to get a game, you might as well start there.