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Saving and Investing

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How can I start investing?

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There are many ways to open an investment account on your own, but you will want to research thoroughly and compare your options before doing so. It is a good idea to get guidance from a financial planner, especially if you are just beginning to invest.

Employer-Sponsored Accounts

You may have the opportunity to open an investment account through work and your employer may even match part of your contributions. That’s free money for retirement. The Internal Revenue Service (IRS) defines common employer-sponsored accounts on its website.

At the very least, contribute enough to get any available employer match. If you don’t like the investment options, you can save money elsewhere, but keep in mind that any employer-based matching program is essentially free money.

Other Tax-Advantaged Accounts

If you want to invest outside of your employer’s plan, you might consider:

  • Traditional IRAs. Contributions are made with pretax money. When you withdraw money in retirement, you will have to pay taxes on the amount contributed and account earnings.
  • Roth IRAs. Contributions are made after you pay taxes. That means you can withdraw contributions at any time, but you can’t touch the investment earnings without paying taxes until you’re age 59 ½ and the Roth IRA account has been open at least five years. When you withdraw money and meet these two qualifications, you will not have to pay taxes.
  • myRAs.The myRA functions much like a Roth IRA, except that the only available investment is U.S. Treasury Bonds, which typically have a lower rate of return than other investments because they are considered very low risk. You only can save up to $15,000 in a myRA. At that point, it will be rolled over into a Roth IRA.

    [As of July 2017, the U.S. Treasury Department discontinued the myRA program. Existing myRA account holders are encouraged to log in to and update contact information. Account holders will be notified of the deadline for rolling remaining myRA funds into a Roth IRA. Please visit for more information.]

To open a Traditional or Roth IRA, research and choose a brokerage that you would like to work with. Compare investment options and fees at each firm before signing up.

Talk to a Certified Financial Planner®

A CFP® will make investment recommendations based on your specific life and money situation. Interview several candidates before selecting a financial advisor and make sure you know how he or she is paid. Some financial planners work for flat fees, while others take a percentage of your portfolio or earn a commission for selling certain products. 

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How does dollar-cost averaging work? 

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Dollar-cost averaging is an investing strategy intended to minimize losses. If you have a lump sum of money to invest, dollar-cost averaging would have you contribute it slowly over time in equal portions at regular time intervals rather than all at once. 

Let’s say you want to buy shares in a particular company. You have $600, but rather than putting it all in at once, you decide to use dollar-cost averaging and put it in $150 each month for four months. The first month, the share costs $75 so you buy two. The next month it falls to $50 and you buy three. In the third month, the price is down to $25 so you buy six shares. In the last month, it’s down to $10 so you buy fifteen.

You paid an average price per share of $21.43 and gained 26 shares, rather than spending all of your money up front only to come out with six shares, for which you paid $75 each.

 (Market high)
 February  March  April
 (Market low)
 $200  $200  $200  $200
 share price

 $35  $28  $24  $20
 Number of
 5.7  7.15   8.3  10
 Total number 
 of shares
 share cost 

Critics of dollar-cost averaging are quick to point out that it also works the other way. If the prices in Month One were $10, Month Two they moved up to $25, Month Three they cost $50 and by Month Four were up to $75 per share, you would be better off putting all of your money in the first month at $10. You would come out with 60 shares, pay a lower-than-average price, and have made a profit as your investment grew.

Because no one can time the market, whether or not you use dollar-cost averaging ultimately boils down to how you view investing. Does the thought of losing money if the market goes down keep you up at night? Then dollar-cost averaging might be for you. If you have a higher risk tolerance, this may not be the best course of action because even as it reduces risk of loss, it also mitigates your propensity for gains.

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How can I save more money?

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We all know we should have an emergency fund and save money for retirement, but knowing and doing are two very different things. When you get your paycheck, it’s easy to rationalize the need for each and every penny today, putting off savings until some day in the future when you’ll make more.

The truth is that one’s wealth and financial health are very rarely on a straight upward trajectory. There is no guarantee that you’ll make more money tomorrow, but you can guarantee that tomorrow will be easier if you start saving money today.

The easiest way to make the process painless is to automate your savings. A good starting point is setting aside 10 percent. If you have regular paychecks, schedule an automatic transfer of 10 percent each time you get paid. That means that if you make $1,500 every two weeks, you would schedule $150 to be transferred to your emergency fund or retirement account.

If you do not get paid regularly, try to manually transfer that 10 percent every time a payment hits your checking account. This method requires more discipline, but once you get into the habit it will become second nature.

You’ll be surprised at how little you miss that 10 percent. As you grow comfortable living on 90 percent of your net income, push yourself. Bump your savings rate up to 15 percent or 20 percent. Every time you grow comfortable, increase your savings rate. Make it a goal to get that number as high as you can while still enjoying the experiences of today with fiscal responsibility. Some sacrifices will be required, but if you progressively raise your savings rate, the practice should give you more peace than stress.

The more you can save today, the more freedom you will have tomorrow. As life’s emergencies pop up, you’ll be able to handle them without going into a financial crisis.