In this guest segment, Jennifer Tuttle, market director at J.P. Morgan Wealth Management, gives basic steps on how to start on your investment journey.
By Jennifer Tuttle, Market Director at J.P. Morgan Wealth Management; Photo courtesy of J.P. Morgan Wealth Management
Investing can be a powerful way to help build wealth in the long term, but it can feel overwhelming to get started. How much money do you need to invest? When is the right time to start investing? How do you create a financial strategy? If you’re new to investing, you might be asking some of these questions.
J.P. Morgan Wealth Management published its Diverse Investor Study last summer, which uncovered different investing preferences across race and gender. Our research found that the majority of women are more optimistic about their financial situation compared to five years ago. While these findings are encouraging, there are still many women out there who aren’t investing or who might find it intimidating.
Here are some broad tips for women who are looking to kick off their investing journey.
Have a Plan
Everyone’s financial situation is different, which is why your investing strategy should be centered around you—your goals and your dreams. It’s important to know what you’re investing toward and how long you have to get there. Take a step back and outline your short- and long-term goals, map out your investing timeline for those goals and ask yourself how much risk you’re willing to take with your investments.
Women tend to live longer than men on average. Some women take career breaks to raise children or act as a caregiver for a family member. These are important factors for women to consider when mapping out a long-term plan for their future.
The Sooner the Better
Starting to invest early on can help you take advantage of the power of compounding. In other words, the earlier you invest your money, the more time it has to potentially grow. It’s so important to take a long-term view when it comes to investing. Remember, it’s not about timing the market, but time in the market.
It’s a common misconception that you need to have a lot of money to be able to invest. This isn’t true. You can start investing a small amount each month and work toward increasing that amount over time in a way that makes sense for you. What’s important is getting started.
Getting Started
For new investors, there are a few things to consider before getting started:
- Understand your full financial picture. It’s important to have an understanding of your budget and your monthly spending and saving before you factor in investing.
- Make sure you have a cash emergency fund. You never want to be in a position where you need to sell your investments to cover an emergency. Depending on your situation, you should have a cash safety cushion of at least three to six months of expenses for any unexpected circumstances.
- Pay down high-interest debt. High-interest debt, such as credit card debt, can add up quickly over time and offset potential investing returns.
Once you start investing, consistency is key. Contribute regularly to your portfolio if you can. One helpful method is setting up an automatic investment plan so you’re taking out the guesswork of deciding when to invest.
For instance, you could be a working mom trying to manage the day-to-day of helping support your family. Retirement might feel far in the future as you’re juggling the costs of everyday expenses, doctor visits, school activities and family trips. But it’s important to prioritize your future self and invest for retirement. It could be helpful to categorize your money into buckets for your different needs and goals. For example, one bucket for your family’s needs, one for future college costs, one for a summer vacation and another for retirement. It doesn’t have to be either or. You can work toward your different goals at the same time. If you feel like you don’t have much to invest each month, remember that investing a small amount is better than nothing.
Overcoming Intimidation
Women can think of financial literacy as a form of empowerment. Better understanding your financial situation and the options available to you can help you make more informed decisions for your future.
J.P. Morgan Wealth Management’s content hub, The Know, offers free educational articles from our specialists on a wide range of personal finance topics including how to start investing, retirement planning at different life stages and the latest market news.
If you don’t feel comfortable approaching it on your own, working with an advisor may be helpful. An advisor can sit down with you and help create a custom-tailored financial strategy based on your unique goals and preferences. If you’re married and share an advisor with your partner, it’s important that you both have a working relationship with the advisor. Money is personal, so it’s crucial to work with a professional who you trust and feel comfortable with.
Jennifer Tuttle is a Market Director at J.P. Morgan Wealth Management, where she oversees advisors in 17 branches across North Austin, Texas. She joined JPMorgan Chase in 2014 and was an advisor before her current role. Jennifer is the proud mother of three grown-up children.