I recognize that this isn’t great—after all, we’ve told you over and over how important it is to invest. Well, I’m going to use this month’s Reddit challenge—Review your investment asset allocation—to fix that!
As always, I’ll outline Reddit’s criteria for success, and throw in my experience along the way. Let’s get started!
First things first, make a list of all of your investment accounts. I’m going to take this opportunity to talk a little bit about some of the most popular investment accounts.
Most people have heard of a 401(k) because they’re typically offered by employers. You can choose how much you want to contribute (up to $18,000 a year), but you’ll have to choose your investments based on what your employer offers.
- 6 Essential Tips to Manage Your 401(k)
- Can I Cash Out My Old 401(k) And Take The Money?
- What To Do With Your 401(k) When You Leave Your Job
- How Much Should You Contribute To Your 401(k)?
IRAs are another great retirement account option. Roth IRAs are our favorites, because your contributions and interest earnings grow tax-free and, at retirement, withdrawals are 100 percent tax-free. You can contribute up to $5,500 annually.
- The Roth IRA: What It Is, How It Works, And Why You (Definitely) Need One
- Climb The Ladder To Early Retirement: Create A Roth IRA Conversion Ladder
- A SEP IRA Can Help Side-Hustlers Save Even More For Retirement
- Choosing Investments For Your IRA
Mutual funds sound a lot more complicated than they are. In fact, they’re one of the best investments for beginners.
A mutual fund is a type of professionally managed investment that pools your money with other investors. This is great because it means automatic diversification. Plus, mutual funds typically have low fees.
Here are some of our favorites!
Everyone seems to be afraid of the stock market. But honestly, there’s nothing to be afraid of, as long as your invested for the long run. In fact, being fully invested in the stock market until your 40’s, maybe a great investing strategy for some!
- How To Get Over Your Fear Of The Stock Market And Start Investing
- Why You Shouldn’t Care About The Stock Market Drop
- Investing For Beginners: How To Read A Stock Chart
Now that you know where you’re invested, it’s important to know what you’re invested in (stocks, bonds, etc). This is also known as your asset allocation.
Here’s a helpful shopping cart analogy to help you understand what asset allocation means:
As you can see, asset allocation is an investment strategy that aims to balance risk and reward in your investment portfolio. It takes into consideration your goals, risk tolerance and investment future.
But now on to how to check your allocation. There are a couple of ways you can check this.
Use Personal Capital
Reddit suggests this, and so do we. If you use Personal Capital and have it linked your investment accounts, just click on “Allocation” under the “Investing” menu. It can also help you track your budget!
Read our full review here!
Or use other Robo-advisors
Robo-advisors are platforms that automatically invest for you, so they’re perfect for beginner investors, or those who just want hands-off investing. As I’ve said, we really like Personal Capital, which also offers robo-advisor services. If you have a lower net-worth or are just starting out, check out another of our top-rated robo-advisors, Betterment.
- Are Robo-Advisors Worth It? A Complete Guide
- Should You Go With A Robo-Advisor Or Build Your Own Portfolio Of Mutual Funds?
- Improve Your Investing: Robo-Advisors Are Becoming More Human
Check your brokerage account
If you don’t use Personal Capital and instead have a brokerage account, you can easily check online—most accounts will show your allocation right on your dashboard.
Step three: Don’t panic!
Even if your allocation isn’t exactly what you want, don’t suddenly change it without doing additional research. If you want to change your allocation, it’s not difficult for you to add another investment of a different asset class. But, your best bet is to get in touch with a financial advisor.
They can help you determine what your investing goals are and how best to reach them. Here’s our list of the best financial advisors for millennials.
Challenge success criteria
According to Reddit, you’ve successfully completed this month’s challenge once you’ve done two or more of the following things:
- Complete all of the recommended reading from above.
- Finish your allocation review.
- Take steps towards researching and changing your allocation if desired.
Alternate success criteria
If you have yet to hop on the investment train, you really should. Luckily, thanks to technology, investing is easier than ever. But, to get you started, let’s cover a few quick investing tips.
For low-cost investing try Acorns and other investing apps
If you just need a little push to get started, go with the simplest strategy. Acorns can take your purchases and round them up and invest the difference for you. It doesn’t get much more simple than that.
Another investing app that rivals Acorns is Stash. With Stash you can invest small amounts of money in investments you actually believe in!
For those ready to get serious about investing, find a discount broker
Finding a cheap broker is a good idea for those who want to get a little more serious about investing.
Betterment, Motif Investing, Ally Invest, and Wealthfront all allow you to start investing for $1,000 or less and set up automatic contributions. They also have much lower fees than more traditional brokerages.
Open a retirement account, any retirement account
Opening a retirement account is important. While you’re young, it may seem like contributing to a retirement account is a waste of money, but you will need that money someday when you can no longer work. And, if you start now, compound interest will do the work for you.
It doesn’t matter if you open a 401(k), Roth IRA, or any other retirement account—just pick the one that works best for you and get started!
Index funds are the simplest investing strategy
Index funds aren’t glamorous, but they’ll make you a great retirement nest egg. For those who don’t know, an index fund is a mutual fund that tracks entire segments of the stock market in a single investment. For example, the most popular index funds invest in the entire S&P 500 stock market index.
With index funds, there’s also significantly less risk in index funds than stocks. They’re also incredibly low-cost—making them perfect for simpler investors.
Reddit’s June challenge is all about checking on your investments, or starting to invest if you already haven’t. Investing is the key to saving enough for retirement, so you want to make sure to start while you’re young. I’ve finally started, so you should too!
- 5 Easy Ways To Start Investing With Little Money
- Best Investment Accounts For Young Investors