When you’re trying to start investing, or invest more than you have before, two of the big questions that people face are:
“How do I get started?”, and “How much should I invest?”
Recently I interacted with Ivana Pino from Fortune, and in this blog update I’ve included my full thoughts on this topic.
Is there a right amount to start investing?
Finding the right amount of money to invest is all about balancing financial priorities. This starts with near-term cash needs (i.e. large purchases, emergency fund), and once that is achieved the priority is understanding cash flow (i.e. excess money that can be invested) against what would be needed to achieve one's financial goals, like retiring at a certain age.
Commission-free trades at low cost brokerages have reduced the minimum amount that people can start to invest, but there are drawbacks. Typically, these platforms limit people only to ETFs, because they make their money by being paid to direct trades to specific counterparties, rather than where the customer will get the best price.
What factors should I consider before I start investing?
Before getting started investing, the top priority is understanding cash needs, then identifying financial goals, and finally bridging the gap between what they can currently do (i.e. saving/investing) in order to make those goals happen.
How often should I revisit much money I am investing?
As a rule of thumb, it's good to reevaluate how much your investing once a year. If you're considering big financial decisions, like buying a house, you'll want to revisit that to have a plan before you decide, and 6-12 months after to see that the decision is going according to how you expected it to go. Homes, in particular, can have a lot of unexpected expenses crop up.
What factors should I consider for how to invest?
The key to investing in the right assets originates with considering what has worked well for someone in the past, and equally important, what hasn't worked well. There can be a considerable gap between what people want, and what they've actually done in the past, and this is especially true during periods of stock market turmoil.
Read the full article on Fortune.
This blog was written by Jeremy Bohne, Principal & Founder of Paceline Wealth Management. Paceline is a fee-only investment advisor serving clients in the Boston area, and on a remote basis throughout the country. Paceline specializes in helping tech and biotech executives, physicians, and those seeking financial planning services.