Do you have your retirement savings totally figured out? Do you know exactly how much you should save, where to keep your money and how to make the most of it? If you answered yes, this post might not be for you. (Congrats on being ahead of the game!) But if your responses lean toward “no,” “maybe,” or, “say what?” then you’ve come to the right spot. We’re digging into your FAQs all about retirement and investing — so you can turn your questions into confidence.
When should you start investing for your retirement?
There’s no magical age when you should begin investing for retirement. But in general, the earlier you can start, the better — because the longer your money is in the stock market, the more opportunity it has to grow. Whether you’re able to invest a big chunk of your paycheck or $20 a month, it’s worth it to start as soon as you can. With an Ally Invest Managed Portfolio, all you need is $100 to open an account and start funding your future.
What questions should you ask before investing in anything?
Before making an investment, ask yourself how it will fit it into your overall financial goals and timeline. Consider how long you plan to hold the investment and how it will shift the balance in your portfolio. You’ll also want to weigh the level of risk you’re taking on and make sure it aligns with your risk tolerance (a.k.a. your ability to withstand market risk and potential losses on investments).
Keep reading: Here’s how to build a portfolio from scratch.
What is a smart strategy for a beginner investment portfolio?
When entering the market, it’s normal to feel a little unsure of which direction to take — from growth investing to building an income-focused portfolio and more. If you don’t feel comfortable picking your investments yourself through a Self-Directed Trading account, a Managed Portfolio can help. Managed Portfolios combine robo-advisor technology and human expertise to select securities that align with your goals (retirement or otherwise), timeline and risk level. Plus, you can add a cash buffer to lessen your risk if you’re nervous to jump in fully.
What is a good investment portfolio mix?
The exact combination of stocks, bonds, and other investment classes in a portfolio, also called asset allocation, should reflect your investment time horizon and risk tolerance. But whether you’re close to retirement or just entering the market, a strong portfolio is a diversified one. That means it holds a variety of investment types, as well as assets that span different industries and geographic locations.
What are growth and income investment strategies?
A growth strategy means investing in stocks that are expected to grow faster than average stocks in that industry. It focuses on maximizing capital gains as the stocks you own appreciate in value. An income portfolio aims to generate passive income you can live off by investing in assets like dividend stocks of well-established companies, bonds and real estate. While you might adopt a growth-focused strategy when retirement is still many years off, you may choose to shift toward an income approach later in life, for example.
How much should I save if I want to retire early?
The amount you should save for retirement heavily depends on the age you want to retire and the lifestyle you want to live, so there’s no one-size-fits-all amount. But if you dream of retiring early, you might start by exploring Financial Independence, Retire Early (a.k.a. the FIRE Movement). Many who aspire to retiring well before their 60s follow principles of the FIRE movement to curb spending and save intensely.
Should you change your investment strategy during uncertain times?
Investing can feel stressful sometimes, especially when the economy is in a rut or the market experiences volatility. But it’s important to focus on your long-term retirement savings strategy and goals (rather than the news headlines) to avoid making emotional decisions. Keep in mind, although past performance is not a guarantee of future results, the stock market has historically recovered from temporary dips and risen long-term.
Should I have an aggressive portfolio?
An aggressive portfolio is one that aims to maximize returns by investing in more risky assets. Typically, that means focusing on securities like stocks and ETFs rather than bonds or cash. This high-risk, high-reward approach can require more portfolio maintenance and monitoring, and investors need a greater tolerance for risk. Aggressive portfolios are usually recommended for younger investors who have more time until they reach retirement to recover from volatility and potential losses.
Should your investing strategy change as you get older?
As you get closer to retirement, it’s common to transition from a more aggressive portfolio strategy (one that’s more heavily weighted toward stocks) to a conservative strategy (one that puts greater emphasis on bonds and other fixed-income securities). Your portfolio may become increasingly susceptible to the effects of volatility as your time in the market shortens, so rebalancing to a less risky asset allocation can help protect you.
Ask and you shall increase your investment knowledge.
Investing can be one of the best ways to save for retirement. But if you don’t feel comfortable in the market or handling your portfolio, you might not be able to take full advantage of the wealth-building opportunities. That’s why it’s never a bad thing to ask questions — even if you feel silly — and get familiar with the world of investing. Because the more you know, the more confidence you’ll have, and the better you’ll feel about all your financial decisions.
Ready to align your retirement goals with your investment strategies?