If you’re stepping foot into the world of investing for the first time, you might be susceptible to some common pitfalls, according to Tori Dunlap, a self-made millionaire and founder of a financial education initiative called Her First $100k. Believe it or not, the biggest misstep it seems is, well, not actually investing.
Throwing Money into a Void?
Not many would think that putting money into a promising vehicle like a Roth IRA or a 401(k) could be seen as a mistake. But, if you’re wondering just how, the answer lies in the application—it’s just half the battle won. As Dunlap rightly points out, the cash only ends up languishing in what she fondly calls financial purgatory, waiting to be utilized.
The IRA/401(k) Conundrum
These retirement accounts, Dunlap explains, need to be viewed as a two-step process. You deposit funds (step one), but then—here’s what’s surprising—those funds need to be actively invested into something worthwhile (step two). If you really think about it, it’s akin to topping up a gift card; the card’s worth nothing until you go out there and buy something. Makes sense now, doesn’t it?
Hurdling Over the Common Mistake
After establishing your Roth IRA with an e-broker and populating it with a specific amount of cash, you need to pivot and channel those funds towards tangible investments like an index fund or a target-date fund. This is when you can think about commodities like gold for instance, just make sure to keep an eye on a live gold price chart at all times or have a trusted someone do it for you. This way, your cash is working for you instead of just sitting idly in your account.
Just as Dunlap said, it becomes a kerfuffle when investors ignore the second part of the equation. Long story short: it’s just as crucial to be proactive with the money you’ve already set aside in your account.
Though this might seem like common sense, a surprising number of first-time investors fall into this trap. So, my rookie investor friends, keep this in mind as you make your first foray into this exciting, profitable, yet unpredictable world of investing. One wonders just how much potential growth we all might have missed out on because we were sitting on our investment gift cards all this while.
Invest carefully, invest smartly. After all, it’s your future you’re financing here.
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