How investing can help your personal finances

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Taking advantage of exciting investment opportunities is the best way to maximize your financial worth. Making your money and assets work for you will generate wealth and help you to achieve financial goals, such as saving for retirement, starting a business or buying a new house.

Robo Advisors

It is easier than ever before to invest due to the rise of a class of online portfolio management advice hubs known as robo advisors. These advisors provide financial advice based on algorithms so you can make smart investments even with limited funds. Investment apps are particularly popular and even traditional firms such as Schwab now have a digital presence, so you could start your investment journey with as little as $5 each month.

Making it big

There is no better case study for how small investments can lead to something extraordinary than the success story of David Kiger. Kiger built a $750 million enterprise from an initial investment of just $5,000 and is now using his expertise in investment and business to help startups thrive. There are many other examples of entrepreneurs using very little capital to generate significant funds, such as Tim Grittani, who traded stocks with life savings of $1,500 and eventually built a portfolio worth more than $1 million.

Making the right moves

According to a report by MFS Investment Management, almost four in ten of millennials claim they will never be entirely comfortable about investing in stocks, but this wariness does not dovetail with the facts. Data shows that a portfolio skewed towards stocks has not lost money in any 20-year period, while gains average out at almost 11 percent each year. Gen Y-ers should have the majority of their portfolio in stocks with around 50 percent in US investments and a third in foreign equity.

Roth 401(k)

Small moves can pay huge dividends over the longer term so you may want to opt for a Roth 401(k). A study by T. Rowe Price shows that workers of all ages across all tax brackets can boost retirement income using the plan, compared to standard pre-tax plans. According to senior financial planner at T. Rowe Price, Stuart Ritter: “The Roth 401(k) should be considered the default investment.” Many large employer plans now include an option for Roth, so you could split contributions if you don’t want to over commit initially.

Concentrated portfolio

Diversity is a buzzword investment but you don’t want to spread your investments too thinly as you may struggle due to a lack of knowledge and experience. Many successful investors concentrate on a small amount of stocks, so adopt a minimal approach to begin with and double down on specific stocks to build a foundation for future growth. You should also try to buy low debt-to-equity stocks when you start out in order to mitigate financial risks.

Groups bring benefits

Going it alone is a viable investment strategy but a study by researchers from Columbia, Harvard and Chile shows that average balances double when working and monitoring investment progress with peers.