If you sat around for the entire pandemic, watching everyone and their mother dive head-first into the world of investing, and thought to yourself, “I wish I could do that,” you’re not alone! While you may have missed out on the trendiness of investing in AMC and Game Stop, you can still learn how to invest in 2022 with investments, that while less fun to tweet about, is certainly less risky and much better investments! So how can you start investing in 2022? It’s easier than you think! First, read this post. Then, call the tax strategy professionals here at ProVision Wealth!
1. Determine Your Tolerance For Risk
For many new investors, the fear of placing your hard-earned money into the stock market can be quite scary. Who could blame you though? When you’re new to something you’re more prone to making mistakes and investing can feel more like gambling.
That being said, there are investments, like index funds, that are safer than others. While safe investments will likely yield slower returns than the latest viral investment trends that are going “to the moon!” the most important thing to consider is your threshold for risk.
By this, we mean that some people will be more comfortable with making riskier investments than others. It’s important to understand what your threshold for risk is before investing a penny because this will help guide which kind of investments you make down the road.
2. Identify Which Type Of Investments You’d Like To Make
Now that you have an idea of how much risk you are comfortable with, you can begin to look at which types of investments you’d like to make.
To simplify things for the sake of this post, let’s consider that there are two kinds of investment strategies that you can take. On one hand, there are index funds that buy “all” stocks from the index you are tracking like the S & P 500. This is a safe investment strategy because index funds try to match the performance of the market benchmarks.
On the other hand, there are actively managed funds that hand-select stocks or bonds within the fund in an attempt to outperform the market benchmarks. As you can see, there is less security in handpicking specific stocks but if they can overperform as hoped, the reward can be quite handsome.
3. Play The Long Game
With any investment, you want to play the long game for a few reasons. First, there are high tax rates on realized profits made through the investments that you held for less than a year. These are your realized gains and they are taxed higher than investments that you hold on to for over a year, sometimes 10 to 15 percent higher. Additionally, making long-term investments will help you ride out the ebbs and flows of the economy. In short, the long game will help you take a smarter approach to your tax strategy.
4. Find A Wealth Strategy Partner
While you can attempt to brave the stock market on your own, learning how to invest is much easier when you have a wealth strategist in your corner. A wealth strategist is your secret tool for making wise investments because they will take the time to understand your personal financial goals and help you reach them through smart, thoughtful investment strategies.