Think you need $50,000 or more to start investing? Think again. $5,000* is more than enough to begin building your portfolio and kickstart your journey into investing.
Before you get started, make sure you have enough saved in your emergency fund to cover three to six months of expenses (after all, investing comes with its own unique risks). Once you’ve got that in place, discover the variety of options available to help grow your wealth.
If you’re new to the investing game, keep in mind the stock market fluctuates — sometimes drastically — throughout the days and months. Average returns stand around 10%, so it’s important to not get too hung up on your portfolio’s daily performance. Always look to your end goal and use the strategies that work best for your situation.
Start a Guided Wealth Portfolio (GWP)**
I generally recommend this solution to members looking to invest a minimum of $5,000. A GWP portfolio is composed of a nice mix of low-cost exchange-traded funds (ETFs) diversified across multiple asset classes to balance your risk and make it easier to reach your goals. Through a user-friendly online platform, you can track account performance 24/7 and receive objective investment advice and support from your personal financial advisory team. Portfolios are tailored to each individual investor’s risk tolerance and automatically adjusts the risk profile as the time for retirement (or a major purchase) gets closer. Another perk: You can add funds to your portfolio whenever you want.
Open a retirement account
To live your best retirement life, start saving early. One good way to do that is to put away a small percentage of each paycheck into a 401(k). Saving becomes second nature with automatic contributions, and you won’t even miss the money since deductions are made before you get paid. Contributions are pre-tax, resulting in lower taxable income, and contribution limits are fairly high at $19,500 in 2021. Some employers even offer a company match, so be sure to check with your employer and take advantage of this “free” money if available.
Fund a Health Savings Account (HSA)
HSAs are one of the most tax-efficient savings vehicles available. Participants with high-deductible health plans can use them to help pay for qualified out-of-pocket medical costs, tax-free. In 2021, the allowable annual contribution for individuals is $3,600 and $7,200 for those with family coverage. What’s more, an HSA isn’t “use it or lose it” — the funds can be carried over from year to year, and easily transfer with you if you change jobs throughout your career.
PRO TIP: Once you start investing — and the longer you’re able to — the more you can harness the power of compound interest, which is the interest you earn on interest. For example, $5,000 today at an interest rate of 5.00% APY (Annual Percentage Yield) will yield $8,144.47 after 10 years, and $21,609.71 after 30 years. With time on your side, you could easily earn thousands of extra dollars (or more) without making any additional contributions.
*An annual small account fee is applied to accounts with less than $10,000 invested.
**Guided Wealth Portfolios (GWP) is a centrally managed, algorithm-based, investment program sponsored by LPL Financial LLC (LPL). GWP uses proprietary, automated, computer algorithms of FutureAdvisor to generate investment recommendations based upon model portfolios constructed by LPL. FutureAdvisor and LPL are nonaffiliated entities. If you are receiving advisory services in GWP from a separately registered investment advisor firm other than LPL or FutureAdvisor, LPL and FutureAdvisor are not affiliates of such advisor. Both LPL and FutureAdvisor are investment advisors registered with the U.S. Securities and Exchange Commission, and LPL is also a Member FINRA/SIPC. All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio; diversification does not protect against market risk. An investment in Exchange Traded Funds (ETF), structured as a mutual fund or unit investment trust, involves the risk of losing money and should be considered as part of an overall program, not a complete investment program. An investment in ETFs involves additional risks such as non-diversification, price volatility, competitive industry pressure, international political and economic developments, possible trading halts, and index tracking errors.
Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA / SIPC). Insurance products are offered through LPL or its licensed affiliates. IHMVCU and IHMVCU Investment Services are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using IHMVCU Investment Services, and may also be employees of IHMVCU. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, IHMVCU or IHMVCU Investment Services. Securities and insurance offered through LPL or its affiliates are: