It’s time to stop being too busy to invest.
Adulthood can be an endless stream of “I wish I could, but I’m too busy.” While the busy excuse may work on your garden, it won’t fly with investing. “Regardless of how busy you are, you can’t put this off,” says Ric Edelman, founder and executive chairman of Edelman Financial Services. The sooner you start investing, the wealthier you’ll become thanks to the power of compounding. “If you have time to scroll through social media, you have time to invest,” says Dave Nugent, chief investment officer at Wealthsimple. These 10 investing tips prove it.
Start with your 401(k).
“The easiest place to start investing is in your workplace plan,” says Shannah Compton Game, a Los Angeles-based certified financial planner and host of the “Millennial Money Podcast.” Just pick your investments, set the percentage of income you want to contribute and money flows into your 401(k) each month. If you hit a full stop after “pick your investments,” consider Blooom, Game says. For $10 per month, this workplace retirement plan robo advisor helps “you select the best portfolio for your given investment options and risk tolerance,” then regularly rebalances your 401(k) for you.
Make investing automatic.
To take the time commitment out of investing, “automate everything you can,” Nugent says. Not only does automation make investing less time-consuming, “but investors who use a ‘set it and forget it’ approach generally do better as they avoid emotional mistakes.” You can automate more than your 401(k), too: Most brokers and online investing platforms enable automatic investments into mutual funds. Set up automatic contributions into some broad-based index funds for instant diversification, then get back to your gardening while your investments take care of themselves.
Investing simplified with robo advisors.
Robo advisors take the pain out of investment selection with prebuilt portfolios. After only a few risk tolerance questions, they’ll get you invested and keep you balanced going forward. They’re are a low-cost place to “get your account diversified when you don’t have a lot to invest,” says Aaron Knoll, president of RockPort Global Advisors LLC. But robos aren’t foolproof: Your investments can still lose money. And without a human financial advisor to talk to about what’s happening in the stock market, investment decisions are often on you alone, Knoll says.
There’s an app for that.
In today’s golden age of apps, you don’t even need to turn on your computer to start investing. It takes five minutes to download an investing apps, answer a few questions for a portfolio reccomendation and set up regular deposits from your bank. With apps like Acorn, you don’t even need to set up automatic deposits. The app’s round-up feature rounds every charge to your credit card up to the nearest dollar and invests the change. “Every time you spend, you’re saving,” Edelman says. “It’s pennies, but for young workers who don’t have a lot of money to invest it’s an easy, painless way to contribute to an investment account.”
Use funds instead of individual stocks.
If you’re determined to DIY your portfolio, opt for diversified mutual funds or ETFs instead of stocks. Unlike individual companies, funds are unlikely to go bankrupt and take your portfolio with it. Being diversified across hundreds of investments, they’re also less likely to take sudden dives in price. It only takes a few funds to build a well-rounded portfolio. Not sure which to choose? U.S News & World Report ranks the best ETFs and mutual funds across dozens of categories.
Focus on asset allocation as opposed to individual investments.
Asset allocation, or the proportion of stock, bonds and alternative investments in your portfolio, is the biggest driver of investment returns. If you have only a few minutes to spare for your investments, dedicate that time to perfecting your allocation. Find the right long-term allocation based on how much your investments need to earn to reach your goals without exceeding your risk tolerance. The higher your required rate of return, the more stock exposure you need. As a rule of thumb, rebalance any time you drift more than 4 percent from your target allocation, says Jesse Abercrombie, a Dallas-based financial advisor with Edward Jones.
Use one-stop shop funds like target-date funds or asset allocation funds.
For a truly low maintenance portfolio, consider target-date funds. The goal is with one fund you can be properly diversified for your age, Game says. Designed for retirement, you can use target date funds to plan for any life event by picking the fund for the date you expect to use the money. The fund will automatically become more conservative as you near that date. If you want to keep the same risk level for the foreseeable future, you can use asset allocation funds. These set a stock/bond ratio and maintain it for life. Upside: no rebalancing necessary. Downside: You have to know when to change your allocation.
Dedicate a few minutes each month to your investments.
Good news, busy investors: You don’t need to monitor your investments 24/7. In fact, not checking in can be the best way to avoid emotional blunders. But “while you don’t need to spend a ton of time each month looking at your investments, particularly if you’re young, you do need to know what’s going on,” Game says. “After all, it’s your money.” She recommends dedicating a few minutes each month to “make sure you’re still happy with your investment choices and check if you need to rebalance.”
Delegate your investing chores to a savvy family member.
If you know you lack the willingness or skill to manage your own investments, delegate, Edelman says. “Don’t add to your burdens because you won’t stick with it.” If you don’t use an advisor, you can delegate to your spouse or an adult child, assuming he or she has the time, desire and knowledge to take over. But “don’t be surprised if your spouse [or child] hires that advisor,” Edelman says. Keep delegation within the family: If you allow a friend to take over simply because you lack the time, “you’ve created a huge opportunity for fraud and abuse,” he says. Not to mention a potential strain on your friendship.
But really, this is what financial advisors are for.
Having an expert to talk to “can not only save you time but also a lot of headaches in the future,” Knoll says. If you’re thinking even an advisor is too high maintenance with their constant calls to meet, you just haven’t found the right advisor. “You don’t need a relationship with your advisor,” Edelman says.”You need to know your advisor is diligently serving you so you don’t have to look at your portfolio every day.” He says to treat your advisor like the doctor: If you’re healthy and nothing has changed in your situation, there’s no reason to meet.
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10 Investing Tips for Busy People originally appeared on usnews.com
