Simple Rules for Beginner IRA Investing

Estimated reading time: 3 minutes(Last Updated On: August 13, 2019)

For big companies, retirement investing isn’t something that employees have to put a lot of thought into. They have their 401(k) plans set up for you can you just have to decide a few of the smaller details. But when it comes to investing in an IRA, there is a lot more that goes into the decisions you have to make.

Not only are you getting the chance to decide between Roth IRAs and Traditional IRAs, you also get to decide what you want to invest in and how much you’re willing to invest. IRAs are unique because you are able to invest in a much wider variety of things rather than the limited investments you can make with other retirement plans. With this expanded selection of choices, however, there are a few things you’ll want to know when IRA investing. Below are some simple ‘rules’ per se to follow for beginner investors.

1. Know what risks you’re willing to take. When investing in anything, one of the most important things to remember is that there is always a risk that comes with it. Investing in high risk stocks can have a higher pay off, but there is also a chance that you could lose a lot of money. Investing in bonds is very low risk, but you also will have less of a reward. If you are willing to take some risks, make sure you know how far you are willing to go. It is also important to remember that the market is constantly changing, so the value of your investments will be moving fluctuating constantly.

2. Decide on an asset allocation that is right for you. Age can have a huge impact on how you invest. If you are just starting to invest and you are a long way off from retirement, you can take more risks because you’ll have more time for them to pay off. However, if retirement is quickly approaching, you’ll probably want to protect your assets. So, low risk investments will be better in this case. You can decide what percentage of your assets you want in different categories based on how much risk you are willing to take.

3. Using professional investors is okay. If you do not know much about the current market and selecting funds and stocks to invest in, it is okay to consult a professional. Not only will this save you time, it can also earn you a lot more money for retirement than if you were to invest yourself. While you may have to pay some small fees for this, the benefits of outsourcing will likely pay for itself several times over.

However you chose to invest, the biggest thing to remember is to think long term. Your retirement funds don’t grow overnight. The market is always changing. While your investments may rise and fall over the years, the general trend is always up, so don’t lose heart if the market is in a down trend. Investing in an IRA doesn’t have to be hard or scary if you keep yourself informed and follow these tips.

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