Investing creates wealth over the long term
Skills and experience matter
Fees can affect overall returns in the long term
When you invest, you are buying a small piece of a company or a small piece of a group of companies. A “diversified portfolio” is a group of investments across many different companies. As the global economy grows, companies tend to follow suit, rising in value over the long-term. As the companies grow over time, your investment in those companies grows as well.
- While the value of stocks and bonds may fluctuate in the short term, they have historically generated wealth over time (a decade or more).
- Holding different types of investments can help reduce your risk of loss over the long term. Automated investing services do this for you.
- If you don’t have investment experience, you may make investing decisions that work against your financial goals. Professional services can help align your investments with your goals.
- Investment services often charge fees to trade and invest on your behalf. Finding a low-cost investment platform that meets your needs can save you money in the long-term.
- There is no crystal ball that will tell you exactly which companies will perform the best over time. Because of this, all investing comes with risk. Still, research and history show that buying and holding a diversified group of investments can generate a positive return over the long term.
Understanding investing terminology can be helpful, but out of the thousands of options to invest in, getting started on your own can be overwhelming.
A great option for all beginners is an automated investing service that will guide you and invest on your behalf for a small fee. Typically, the more hands-on the service, the higher the fee. Individuals who have a high net-worth may desire a personal relationship with a financial adviser; however, for most people getting started, an automated investment service can invest your funds for you, automatically diversify them, and adjust your collection of stocks and bonds, i.e. your portfolio.
Here are a few options to get started:
- Automated investment services (e.g. Betterment): after a brief questionnaire about you and your goals, they will automatically invest your money for you in passive, diversified funds and typically charge low fees.
- Self-guided fund providers (e.g. Vanguard): they use online questionnaires to help you decide which investment funds are appropriate for you, you will buy the investments yourself, and they typically charge low to medium fees
- Traditional investment advisers (e.g. Merrill Lynch): you will talk to a human financial adviser face-to-face or on the phone to set up a plan for you. As the adviser will invest your funds according to your plan, this usually comes with higher fees than automated services.