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savingsChoosing how, where and when to invest your money can be a difficult decision, especially if you are a first-time investor. There are several different ways to invest, each with its own risks and rewards. Here are a few tips for new investors.

Set your goals:

Writing down your goals is the first step in investing. Do you want to fund a specific expense or make general investments? A universal goal is often retirement, but other examples are a down payment on a home or paying off student loans.

Choose how you want to invest:

Just like there are different types of banking accounts – i.e. checking, savings, certificates of deposit – there are different ways to invest. Some of the most popular investing accounts include:

  • 401(k) – 401(k)s are offered through many employers and takes contributions from your paycheck. Many companies will match your contributions up to a certain percentage, as well.
  • Traditional or Roth IRA – In a traditional IRA, your contributions are tax-deductible, but distributions in retirement are taxed as ordinary income. A Roth IRA is similar to the traditional version, except contributions are made after-tax, but money grows tax-free and distributions in retirement are not taxed.
  • Taxable Account – Taxable accounts are not earmarked for any specific purpose. Unlike retirement accounts, there are no rules on contribution amounts, and you can take money out at any time. These accounts do not have specific tax advantages. If you are saving for retirement and you max out the other options, you can continue saving in a taxable account.

Decide how risky you want to be:

Ask yourself, where do I want to invest my money? The answer will depend on your goals and willingness to take on risk in exchange for potential higher rewards. Common investments include:

  • Stocks – Individual shares of companies you believe will increase in value.
  • Bonds – Bonds allow a company or government to borrow your money to fund a project or refinance other debt.
  • Mutual Funds – Investing your money in funds allows you to purchase many stocks, bonds or other investments all at once. Mutual funds build instant diversification.
  • Real Estate – Real estate is a way to diversify your investment portfolio outside of the traditional mix of stocks and bonds. You do not have to buy a home or be a landlord – you can invest in REITs, which are like mutual funds for real estate, or through online real estate investing platforms, which pool investor money.

SmartBank has partnered with Raymond James Financial Services to provide you a broad array of products and services to help you reach your financial goals. From education planning to retirement, we can help you decide which investment option is best for you. https://www.smartbank.com/investment-services/