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Yes, Investing Can Be for Anybody… Here's What You Need To Know To Get Started
Whether it's crossing a country off the bucket list, going for that degree, or simply eating a few more plants each day—we're all working toward living our best lives. And if living our best life is the destination, then we can consider finances our fuel for getting there. No matter where we are in our journey, it's never too late to build financial confidence to enhance our overall well-being. Understanding the financial decisions that have the potential to benefit us in the long run—like investing—can help us pursue a smooth and enjoyable ride.
Maybe it's because of scenes from extravagant finance flicks like Wolf of Wall Street, or lack of money conversations with our parents, but investing has always felt a little intimidating.
There's no shortage of myths surrounding investing either: that you need a large sum of money to get started, that it's too risky or simply reserved for the wealthy. This kind of thinking could explain why 41% of Gen Z women and 34% of Gen Z men have yet to invest, but the reality is, anyone can do it. Learning more about how to efficiently manage your money can even help ease financial anxieties and stress. The good news, it's easier than you might think.
Give me the investing 101.
Investing is all about putting your money to work, typically over a longer period of time, in hopes of a profitable return. But…why bother? Why not stash your money in a savings account and call it a day?
Savings accounts have their advantages, like protection from loss, but investing offers you the potential to build wealth more quickly when the market rises, if you're willing to take more risk with your money. Another force at play is inflation. Inflation is the rate by which the purchasing power of money changes over time. If you saved $100 and the year's inflation rate was 3%, it would be worth $97 next year. Building up a savings account can support shorter-term, big purchases (like fixing your car or finally buying that KitchenAid stand mixer)—but in a perfect world, investing provides the potential to accrue money over time while outpacing the rate of inflation.
"Investing can sound intimidating if you're a first timer, but even if your future goals seem far away, the earlier you start investing, the better," said Matt Gellene, Consumer Banking & Investments, head of consumer client management at Bank of America. "The key to financial stability is financial literacy. First, decide on what major financial milestones you hope to achieve, and then create a work-back plan to reach your goals."
Risk and reward.
Investing 101 ultimately boils down to a conversation about risk versus reward. In the investment world, risk refers to the uncertainty that an investment carries: It could lose value or generate a return that underperforms compared to expectation. But taking the risk when it comes to investing allows the chance for reward. In investing lingo, reward refers to money that you earn back on your investments, or the increase in value that they gain over time. The dynamics of risk and reward vary based on the type of investment you choose but can be thought of as the basic forces at play. To find the right balance of risk and reward for you, consider when you will need the money and how much uncertainty you are comfortable with.
So, how to get started?
Let's debunk the myth that you need some miracle inheritance in order to start investing. The truth is, you can start investing with just a few hundred dollars—and the sooner, the better—thanks to another basic investing concept known as compounding. Compounding interest is what happens when you reinvest your earnings and earn dividends on your dividends. Dividends are the distribution of profits by a corporation to its shareholders.
Think of it as a snowball that grows bigger and faster as it rolls its way down a mountain. The sooner you get started (even with a small amount), the quicker compounding interest could become your reality.
But what does getting started actually look like? Once you have funds ready to invest, there are a variety of ways to dive in. For those who are comfortable picking their own investments, a self-directed investing account might be a good choice. If you want the best of both digital resources and one-on-one guidance to help you pursue your goals, you could leverage a service like Merrill Guided Investing with an Advisor. As your financial needs or goals become more complex, or you want to increase the amount you are investing, you can work with a financial adviser for individualized support.
There are many ways to gain access to the educational tools to help you become more confident about managing your money and investments. Whether you need a single account to grow your wealth or several accounts to support multiple objectives, they help define the investing experience that works for you. Clearly, investing is a bit of a strategy game—and working with an adviser can help you get clear on your financial circumstance, your appetite for risk, and your future goals.
"Don't be afraid to lean into professional expertise as you're learning," says Gellene. "Advisors are there to help and can provide personalized advice and guidance unique to your specific needs."
The big picture: Investing and your future goals.
So, how does investing fit into your overall financial picture? It's true that over time, a savings account will accrue a certain amount of interest with a lot more certainty. But generally, investing opens up a world of possibility and gives you the potential to earn more when the market is rising. What you invest has a chance to earn a higher return than your savings account, and faster, if you can be comfortable with the risk that you might also lose money. That's why, along with building wealth, many consider investing as a means to pursue long-term financial goals—like paying for an education, buying a house, or saving for retirement.
Keep it simple.
However you envision your best life—whether it's organic groceries, unlimited yoga, or buying your dream home—money will always have a role to play in well-being. And with the right resources, it doesn't have to be complicated. The faster we can simplify our money life, the faster we can achieve our long-term goals…and maybe investing is your next step!
To learn more about the educational tools and resources to begin your investing journey, visit https://www.merrilledge.com/.
Learn more and see important disclosures about Preferred Rewards, banking with Bank of America, and investing with Merrill.
Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as "MLPF&S" or "Merrill") makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation ("BofA Corp."). MLPF&S is a registered broker-dealer, registered investment adviser, Member SIPC, and a wholly owned subsidiary of BofA Corp.
