{"id":16952,"date":"2023-12-13T09:22:37","date_gmt":"2023-12-13T17:22:37","guid":{"rendered":"https:\/\/canary.kcprod.info/blog\/?p=16952"},"modified":"2024-06-24T11:00:53","modified_gmt":"2024-06-24T18:00:53","slug":"ask-wealthfront-start-investing","status":"publish","type":"post","link":"https:\/\/canary.kcprod.info/blog\/ask-wealthfront-start-investing\/","title":{"rendered":"Ask Wealthfront: How Should I Get Started With Investing?"},"content":{"rendered":"\n

Welcome to our Ask Wealthfront series, where we tackle your questions about personal finance and investing. Want to see your question answered here? Reach out to us on social media and we\u2019ll try to address it in a future column. Note that this column has been updated to include Wealthfront\u2019s <\/em>Automated Bond Ladder<\/em><\/a>, which launched in May 2024.\u00a0<\/em><\/em><\/p>\n\n\n\n

\n

What steps can someone take if they don’t know where to start with investing? <\/strong><\/h2>\n\u2013Jessie P. <\/strong><\/cite><\/blockquote>\n\n\n\n

Getting started with investing can feel daunting if you\u2019ve only ever kept your money in a high-yield account like the Wealthfront Cash Account<\/a>. Earning a competitive interest rate (like Wealthfront\u2019s high 3.30% APY along with up to $8 million in FDIC insurance<\/a> through our partner banks) is great, but investing makes sense if you\u2019re hoping to grow your savings for the long term. That\u2019s because your returns are more likely to keep up with inflation<\/a>. Here are some helpful steps to consider as you get ready to invest.<\/p>\n\n\n\n

Step 1: Make sure you\u2019re really <\/em>ready to invest<\/h2>\n\n\n\n

Make no mistake: at Wealthfront, we are big proponents of investing to build long-term wealth. But before you jump in, we believe you should meet a few minimum requirements.<\/p>\n\n\n\n

Specifically, you should have an adequate emergency fund<\/a> (generally this is about 3-6 months of living expenses) and have enough cash to cover any short-term expenses before you start investing. The reason for this is that markets can be volatile in the short term. If you invest your savings before you have a good emergency fund set up, you run the risk of needing those emergency savings but finding the value of your investments has declined. In that situation, you might have to sell your investments to cover your emergency and lock in your losses, which nobody wants.<\/p>\n\n\n\n

You should also consider paying down any high-interest debt before you start investing. As a rule of thumb, you should tackle any debt<\/a> with an interest rate that\u2019s higher than the rate of return you\u2019re likely to get on your investment. Of course, the future is uncertain and it\u2019s impossible to know exactly how much your investments will earn, but you can use tools like Wealthfront\u2019s historical returns page<\/a> to make an informed decision. <\/p>\n\n\n\n

Step 2: Figure out your high-level approach<\/h2>\n\n\n\n

There are a lot of ways to invest, and not all of them involve scouring the newspaper for insights and picking individual stocks. If you\u2019re just getting started, arguably the smartest and easiest way to begin is by using a robo-advisor like Wealthfront to set up an automated, globally diversified portfolio of low-cost index funds like Wealthfront\u2019s Classic<\/a> or Socially Responsible portfolios<\/a>. These portfolios are a good choice if you are saving for something at least 3-5 years in the future. Not only will you skip the hassle of choosing and managing your own investments, but you\u2019ll also benefit from our time-tested, research-backed approach to investing<\/a>. <\/p>\n\n\n\n

There are some things investors can\u2019t control, like the daily ups and downs of the market. But we encourage you to focus on what you can<\/em> control. <\/p>\n\n\n\n

    \n
  1. Lowering your taxes<\/li>\n\n\n\n
  2. Reducing your costs<\/li>\n\n\n\n
  3. Managing your market risk through diversification<\/a><\/li>\n<\/ol>\n\n\n\n

    Wealthfront\u2019s Automated Investing Accounts<\/a> are built to handle all of this for you: Our Tax-Loss Harvesting<\/a> service monitors daily market volatility to find opportunities to lower your tax bill  automatically, we charge a low, 0.25% annual advisory fee for our Automated Investing Accounts, and we offer you an expert-built, diversified portfolio that is fine-tuned to your particular risk tolerance<\/a>.<\/p>\n\n\n\n

    If you\u2019re investing your savings for an important future expense like a down payment and want to keep growing your cash with lower risk to your principal, you might consider investing in a portfolio of US Treasuries like Wealthfront\u2019s Automated Bond Ladder<\/a>. While the long-term expected returns are lower than that of an Automated Investing Account, our Automated Bond Ladder lets you lock in current interest rates with extremely low risk US Treasuries, which are backed by the full faith and credit of the US government. And because Treasuries are exempt from state and local income taxes, you can earn more and keep more than you would with most savings accounts or some CDs<\/a>.\u00a0<\/p>\n\n\n\n

    Step 3: Don\u2019t overthink the timing<\/h2>\n\n\n\n

    Once you\u2019ve decided you\u2019re ready to invest and you\u2019ve picked your approach, it\u2019s important not to overthink the timing. There\u2019s a famous saying that time in the market beats timing the market, and we think those are wise words.<\/p>\n\n\n\n

    You might be tempted to wait for the \u201cright\u201d time to invest, but this approach is likely to hurt you. We analyzed<\/a> what might happen if you tried to \u201cbuy the dip\u201d in the S&P 500 over the last 30 years and found it was likely to be an expensive mistake. <\/p>\n\n\n\n

    Instead, remind yourself that time is on your side. The sooner you invest, the longer any potential returns will have to compound<\/a> (compounding can be so powerful that Albert Einstein himself called it the 8th wonder of the world). And if you just can\u2019t stomach the thought of investing all of your cash on one day, you can use a strategy called \u201cdollar-cost averaging\u201d to help out. With dollar-cost averaging<\/a>, you invest a set amount of money on a set schedule\u2014so, for example, you might invest $1,000 every week for 5 weeks instead of $5,000 all at once. <\/p>\n\n\n\n

    Step 4: Set it\u2026 and try to forget it<\/h2>\n\n\n\n

    Once you\u2019ve started investing, the final step is to keep it up. This means leaving your money in the market (and ideally adding more), even through periods of volatility, so it can have the opportunity and time to grow and compound. This sounds easy, but it can be emotionally difficult when the market is down and the headlines are dire. Stay the course. In reality, investing consistently through periods of volatility<\/a> is likely to work out in your favor. The less you check in on the day-to-day movements in the value of your portfolio, the easier it can be to tune out the noise and focus on the long term.<\/p>\n\n\n\n

    We hope this information helps you feel more confident about getting started with investing! <\/p>\n","protected":false},"excerpt":{"rendered":"

    Welcome to our Ask Wealthfront series, where we tackle your questions about personal finance and investing. Want to see your question answered here? Reach out to us on social media and we\u2019ll try to address it in a future column. Note that this column has been updated to include Wealthfront\u2019s Automated Bond Ladder, which launched […]<\/p>\n","protected":false},"author":10000,"featured_media":16958,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[1282],"tags":[],"coauthors":[2508],"class_list":["post-16952","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing"],"acf":[],"yoast_head":"\nHow Can I Get Started With Investing? | Wealthfront Blog<\/title>\n<meta name=\"description\" content=\"If you\u2019re a new investor, getting into the market can feel intimidating. 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