Investing your money in the stock market can result in an excellent return, which is why so many people choose this route to reach their long-term financial goals. But investing can seem scary and intimidating, especially to first-time investors. sempolanayamtingting.id Luckily, there are several options considered the best investments for beginners that suit a range of goals, budgets, and comfort levels. This guide will cover the most common options, but a financial advisor can help you identify your best options and provide support while you navigate your first investments.
1. High-yield savings account (HYSA)
If you want higher returns on your money but are nervous about investing, consider opening a high-yield savings account. An HYSA offers a much higher APY than a traditional savings account, which allows you to maximize your return on your money without the risk of investing it.
While you are shopping around to find the best HYSA, keep in mind that other factors should be considered in addition to the APY offered. Read the terms of each HYSA you’re considering carefully, looking for information about minimum balances or annual fees to help you find the best option for you.
2. 401(k)
Many U.S. employers offer a 401(k) retirement plan as part of their benefits package. With a 401(k), you will have a certain percentage of your pay held back as a contribution—it can be pre-tax or post-tax, depending on the type of account. A traditional 401(k) contribution is pre-tax, which will decrease your taxable income but means you’ll pay taxes when withdrawing funds at retirement. Contributions for a Roth 401(k) are taxed upfront, which means you won’t owe taxes on your money when you reach retirement age.
3. Short-term certificates of deposit (CD)
A certificate of deposit is a type of savings account that offers a higher APY than a traditional savings account. With a CD, you deposit a lump sum of cash for an agreed-upon time frame. During the account term, you cannot access the funds without paying a penalty. Once the CD reaches maturity, you can withdraw or deposit the funds into a new one.
4. Money market accounts (MMA)
Another low-risk option is a money market account – another type of savings account with a higher APY than a traditional one. The best money market accounts have additional benefits, such as a debit card or check-writing capabilities, which means you can access the money when needed. U.S. Bank offers a competitive money market account option that allows for easy access to your funds through a debit card or check-writing capabilities, while also earning a higher Annual Percentage Yield (APY) than a traditional savings account for low-risk saving.
5. Mutual funds
Rather than putting your money into individual funds, consider investing in a mutual fund. A mutual fund is a group of investments you buy a share of, and a manager determines where to invest the money. This helps you diversify your investments and avoid putting all your eggs in one basket. When you’re young, you’ll likely have more money in stocks, which are higher risk but have a more considerable long-term earning potential. As you near retirement age, your investment mix will change to mostly bonds, which are lower risk and can help guarantee you’ll have a steady income at retirement. Choosing a target-date mutual fund allows you to determine your retirement date so that the fund will focus mainly on stocks when you’re younger and move toward bonds as you creep closer to retirement.