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When you learn about investing it probably shouldn’t just come from a co-worker, family member or trusted friend. In many cases, the person being asked for advice doesn’t know much more about investing than the person asking. Even when the person providing advice does have some investing insight, it’s unknown how good the advice is to a novice investor. The only way to feel good about your investment decisions is to do the research on your own.
It never hurts to collaborate with people in your network to understand their point of view or potentially uncover an aspect of investing you aren’t aware of. In the end though, it is up to you to decide what is best for your situation. The advice given by a co-worker may be great advice for someone in their exact situation, but there’s likely differences between your co-worker’s financial goals and yours.
Knowledge is power. The more you know the better. The great news is, building a knowledge base for investing is not as difficult or time consuming as you may think.
Learn About the Different Types of Investing Portfolios
Most people are investing money into either a 401K, IRA or brokerage account. Some people may have multiple types of investment portfolios. Regardless of the type of investment portfolio you have, there are several investment options within each type for people to choose from and learning which option(s) suits your needs best is vital.
The longer you have to go until retirement, the more aggressive you can be with your investment portfolio. As you get closer to retirement you will likely want to invest a portion of your money into lower risk investment options like bonds.
The type of fund(s) you invest in is less important the longer you have to go until retirement, so long as the fund provides higher than average annual returns and charges below average fees. While annual returns are an important aspect of a fund’s performance, the fees associated with that fund may have greater long term costs on your portfolio than you think. Make sure you understand the impact fees have on a portfolio.
Learn How to Read an Investment Fund Chart
The financial institution where your money is being invested likely has a chart that lists all the funds they have available for you to invest your money in and a breakdown of what the performance has been on those funds and the fess associated with them. This type of chart can be found under the Investments or Investing section on most financial institution’s websites. Below is an example of the type of chart you will find:
The following are descriptions for columns shown in a typical Investment Fund Chart:
- The first column in an investment fund chart is the name or symbol of the fund. The type of fund (index, growth, trust, bond, etc.) is usually included in the name.
- Investment fund charts will list several time frames to show the funds’ performance during that time frame. The chart above covers 1 month, 3 months, year to date, 1 year, 3 years, 5 years, 10 years and through inception (the date the fund was created through the current date). The last one in the table is the only one that has not been around for a full 10 years.
- Fund Inception Date shows when the fund was created.
- Gross Fund Exp % is the total fees associated with investing in this fund.
- Net Fund Exp % is the total fees associated with investing in this fund less any fee waivers or reimbursements. It’s important to remember these deductions may only be temporary and the Net Fund Exp % could increase to the Gross Fund Exp % later.
Learn About Vanguard’s Investing Fund Chart
Vanguard is a leading financial institution who offers funds with some of the lowest fees. Explore the options for yourself. Visit Vanguard’s website to find their investment fund chart.
Select Investing on the main toolbar, then choose Mutual Funds under Investment Products, then under Explore All Our Mutual Funds click on Browse Vanguard funds by asset class. This will take you to a table showing all of Vanguard’s mutual funds options. There is also a tab in this view that will take you to view all of Vanguard’s ETF options.
Learn How To Navigate Investing Fund Charts
Most of these types of charts are interactive, meaning you can sort the data in a format you want to see it in. Sort from lowest to highest fees to start getting an understanding of which funds have low fees and high returns. You will start to see a pattern on certain types of funds.
For example: bonds may have low fees but generally they have low returns. Stocks and bonds tend to move in opposite directions. As stocks prices drop due to a slower economy, bond prices will rise. This is because people view bonds as safe and will often move their money from stocks to bonds in a weaker economy.
Learn About Investing Options
The other most common type of investment fund to choose from in a retirement account is Mutual Funds. These come in the form of index funds, balanced funds, equity funds, growth funds, international funds and more. These funds will show higher returns then bonds unless the market is down and then bonds will likely have higher returns.
ETFs are a quickly growing investment option. The big difference between Mutual Funds and ETFs is ETFs can be traded during the day in real time while Mutual Funds are traded at the end of the day after the market closes. This article from Fidelity gives great insight on the benefits of ETFs. Also worth noting – the design of this type of fund gives way to lower fees than the average Mutual Fund.
Learn How to Read a Funds Prospectus
If you are having a hard time finding the performance and fees associated with a fund, you can do an internet search using the funds name or symbol in conjunction with the word “prospectus”. A prospectus is a report that describes the investment objectives and strategies and most importantly provides the performance and fees of the fund. Below is an example of what you are looking for:
Be careful though as a prospectus might list out multiple funds for a financial institution. The one above shows two different shares options for the same fund. The lower fee option requires you to invest more money. Make sure you are reviewing the information of the fund you are interested in.
Go Beyond Just Learning About Investing
While there is a lot to learn about investing, the fundamentals don’t change. The less fees you pay and the higher your return, the more money you will have.
Wise investing is critical to any retirement plan. Check out this retirement saving plan road map to make sure you’re on track to retire on time.
The Ultimate Retirement Savings Plan Road Map
Most Americans recognize they’ll need at least $1,000,000 to live comfortably in retirement. However, according to a TransAmerica Center study, over 35% of Americans do not have a retirement savings plan and only 19% have a written strategy.
Don’t be one of those people. This series will walk you through the importance of planning ahead for retirement all the way through how you can boost your current investment strategy.
Take control of your future by planning wisely. It’s never too early! In fact, the sooner you start the better off you’ll be.
- Understand the importance of having a retirement savings plan that meets your needs, not the average person’s needs.
- Review your current expenses and see if you can cut costs anywhere to save faster for retirement.
- Use your current expenses to estimate what your expenses will be like in retirement.
- Plug your unique and individual estimated retirement expenses into 2 tested guidelines to calculate YOUR ultimate retirement savings goal.
- Discover why a Health Savings Account (HSA) is the gold standard for retirement savings and how to make it work best for you.
- Understand the different types of retirement accounts and which ones are the best for you to invest in.
- Learn about costly mistakes you will want to avoid when you invest your money in retirement savings.
- Wrap your head around the fees associated with investing, particularly avoidable ones charged by a financial adviser.
- Understand the different types of mutual funds available and how to determine which one(s) are the best to invest it.
- Review your investments and explore ways to know if they are working for you.
Retirement Expense Planning Worksheet
Use this expense tracker to record current expenses and estimate future expenses. This tracker includes tips on how certain expenses will change for the better or worse in retirement. Get started recording your current expenses today and feel better prepared for tomorrow.