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How to Save and Invest at the Same Time

Posted by : Premraj | Posted on : Monday, March 1, 2021


Should you save or invest? Wait a minute. Why not both?

For many Americans today, it can be difficult to do both, considering the present economic conditions and their individual financial situation. That said, saving should be of the utmost priority for any household, followed by investing additional money into stocks, bonds, mutual funds, or exchange-traded funds (ETFs). Whether money is tight, or you have dollars and cents bursting at the seams, it is feasible to save an adequate sum of money and invest a healthy amount into the financial colosseum.

We have compiled a guide on how to save and invest at the same time without sacrificing either:

1. Automatic Savings Plan

Before you start diving into the fun world of investing, it is critical that you pay yourself first after you deduct all your essential and non-essential spending, from rent to utilities to food.

The objective should be to set aside a minimum of ten percent from every paycheck. Is it challenging? In this economy, of course. Is it doable? Yes.

The solution is utilizing an automatic savings plan (ASP), which immediately withdraws money from your checking account and into a savings account every week or month. This can be described as a “set it and forget it” approach to saving, since the money is automatically transferred and out of reach, removing the headache of having to consistently remind yourself to cut back on the spending.

2. Mutual Funds

For anyone who is just getting started in the financial markets, a great way to build some exposure without having to stare at CNBC all day long is to open a mutual fund account. It is actively managed by professionals (beware of fees!) and all you do is contribute to the fund of your choice every week, bi-weekly, or month. Over time, your investment grows without doing anything at all.

You can treat a mutual fund similarly to an ASP. You just need to know what mutual fund to buy.

Typically, when you are starting out, its advise to adopt a low-risk approach. Therefore, your best option is a mutual fund that tracks some of the main benchmark indexes, like the Dow Jones Industrial Average or the S&P 500. Since they travel upward over the long term, your nest egg can grow.

After achieving some success, you can upgrade to individual stocks and exchange-traded funds (ETFs).

3. Mobile Apps

The U.S. financial market is one of the most innovative and advanced industries in the world. This is most pronounced in the fintech sphere, where mom-and-pop investors can start dipping their toes in the stock arena and purchase small amounts of shares in companies without paying egregious fees.

Indeed, many mobile applications allow you to purchase fractional shares or use additional change from your daily transactions to invest into the financial market.

Here are some of the most popular apps for achieving these aims:

— Acorns: Fractional share investments in ETFs and Robo-advisor services.

— Webull: A $0 commission platform for trading stocks, ETFs, and options.

— Betterment: Robo-advisor platform to pick stocks, bonds, and funds based on your investment goals.

— SoFi: A full-service finance platform that allows users to buy fractional shares (Stock Bits).

4. Change Your Accounts

Often, it is the little things that can make a big difference for your money. One of these modest adjustments you can target is your accounts.

Whether it is paying fewer fees or receiving new features, the finance industry has created a wide variety of accounts within which you can store or save your hard-earned dollars. You may particularly enjoy the convenience and growth potential of an all-in-one checking and investing account like Finch, which pays daily investment distributions. This is beneficial for individuals who are tired of their money lying dormant and not doing anything, but still desire accessibility to their funds for daily expenses.

5. Establish a Long-Term Investment Plan

A long-term investment plan is critical for financial success. As you start accumulating more money and financial knowledge, it is crucial to develop a long-term investment strategy.

This can be a daunting task, so here are some tops tips from the experts for establishing a sound financial strategy that can get you on the right track:

— Don’t chase hot tips, penny stocks, or volatile market movements. Instead invest in established companies with a great track record.

— Don’t be an emotional investor; avoid giving into impulses and short-term movements. This being said, adapt to changing conditions when it makes sense.

— Consider dollar-cost averaging (DCA) to avoid the effects of volatility over the long term.

— Ensure you have a diversified portfolio, but don’t go overboard. Aim for 1-3 stocks when you’re starting out, aiming for no more than 8 as you become more comfortable with the process.

Everyone has different priorities. Some want maximum returns with the greatest risk, while others wish for modest returns with lower risk. Think about your investment behavior, how much you earn, and where you see yourself in ten, 20, or 30 years.

Do you need to sacrifice saving at the expense of investing – and vice versa? No! Thanks to innovative products and technologies available within the financial and fin-tech spheres, now you can do both. Now everyone can experience the satisfaction of having your hard earned dollars work just as hard for you!

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