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Investment Management Strategies for First-Time Investors Thumbnail

Investment Management Strategies for First-Time Investors

Most people know we should save for retirement.

However, today, roughly one in five Americans (21%) don't save any money at all towards their retirement.

The amount of Americans saving 15% of their annual income or more for retirement isn't very uplifting either (only 16%). Most experts state that people should save between 15% and 20% of their annual income — and that's if they start early. 

Wherever you are in your financial journey, understanding investment management strategies is one of the most crucial steps you can take towards planning for retirement. 

Stick around for a list of investment management strategies you can start as early as today.

What Exactly Is an Investment Management Strategy?

An investment strategy is a sort of a guide for how you plan to invest your assets for eventual retirement.

The best investment strategies are tailored to help you meet your financial goals. But, at the same time, they should manage the level of risk that is comfortable for you.

When deciding on your investment strategy, you may want to ask yourself a few questions: 

  • What are my financial goals for retirement? 
  • At what age do I wish to retire?
  • What level of risk am I most comfortable with as I grow my wealth? 

Understanding some of the answers to these questions will help you make informed decisions about your investment strategy for retirement. 

If you're still not sure after this exercise, you can always seek help from a professional

Once you have determined an investment strategy that aligns with your goals, it's time to think about investing in your future. 

Investment Strategies for Beginners

Even if you haven't started investing yet, you can take some simple steps to begin as soon as today. Many people start investing through their company's 401(k). 

401(k) Program

If you have a 401(k) provided through your employer, you can enroll when eligible through your human resources department.

Some companies will even offer to match your investment up to specified limitations. If your company offers an investment match — use it! It's literally free money to help you build wealth towards retirement.

If they don't offer a match, consider how much you're comfortable with saving. You can put up to $19,500 into your 401(k) each year, and up to $26,000 if you are over the age of 50.

Another great option for beginner investors is an Individual Retirement Account (IRA). 

Individual Retirement Accounts (IRA)

Another way that many people start with investing is through an IRA. You can set up an IRA in minutes through a custodian

The great news about IRAs is that you can contribute monthly, up to the annual limit, or make a larger one-time deposit.  Another added benefit is you can have more flexibility on what investments you choose to invest in your IRA.   Your investment grows on a tax-deferred basis or a tax-free basis depending on which type of IRA you make contributions to.

When it comes to IRAs, you have two choices: 

  • Traditional IRA – you may receive a tax deduction for your contribution, but you will pay taxes on the distributions when you use the money in retirement. 
  • Roth IRA – You do not receive a tax deduction for your contribution, but withdrawals in retirement are tax-free.

By far, the best way to save money at retirement time is to invest in a Roth IRA, if you qualify based on your level of income. That's because taxes can always go up by the time you retire.

While you can't control the taxes you pay today, you can control the taxes you'll pay in the future. A Roth IRA bypasses the taxes you would have to pay come retirement time. 

As you become more familiar with investment strategies, you may progress to some popular investment strategies. 

Popular Investment Strategies

Once people become a little more accustomed to investment management, they start to look outward for more opportunities. Here are a few of the more popular investment strategies people use: 

Index Funds

Did you know that you can actually own the top 500, 1,000, or even 2,000 stocks on the market for a small price? 

It's true! They are called index funds, and today there are many indexes that you can invest in. They are a great way to invest in the overall market. This limits your risk and diversifies your portfolio. 

Diversification is key to limit the amount of risk. It's the idea of not putting all your eggs into one basket. 

Another advantage of an index fund is the generally low level of management fees charged by the fund. That saves you money on fees you'd usually spend for vehicles like traditional actively managed mutual funds. 

Buy-and-Hold

As you pay more attention to the market, you may start to find wonderful companies you'd like to invest in long-term. If that's the case, then the buy-and-hold investment strategy is for you. 

When people buy-and-hold stocks, they select investments that they believe will have long-term success. Consider the companies that you use every day. 

Are you an avid Target shopper? Do you go ga-ga for coffee at Starbucks? Do you love to find a deal at Walmart? 

What are the companies you are familiar with that you could invest in long-term? Then, find some wonderful businesses and apply the buy-and-hold investment strategy. 

Dollar-Cost Averaging

Many investors like to wait for the right price. However, if that's not your style, you can apply a term called dollar-cost averaging. 

Dollar-cost averaging works like this:

Let's say you love Disney, you go every year, and your kids are obsessed with it. You think, "Hey, there's a wonderful business. I should own stock in it!" 

You look at the stock price, but it seems rather high. So, do you wait or buy knowing that the price may go up or down? With dollar-cost averaging, it doesn't matter. 

Dollar-cost averaging is the principle of regularly investing in a stock over time. For example, let's say the first month, Disney's stock price is at $89 per share. The next month it's at $94, and the following month it's back down to $87. By dollar-cost averaging, you buy more shares for a fixed dollar amount when the price is down, lowering your average cost of ownership over time.

Could You Use Help With Your Investment Management Strategies? 

If you're anything like most people, you could use some help with your investment management strategies. There's nothing wrong with working with a professional. 

If you're looking for experience and guidance on your path to retirement, trust Integra Capital Advisors. 

We have an array of services to help you improve your investment plan and get you on the road to success. 

For more information, contact us today.