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So, I’m thinking about saving, now what?

Great! I’m a big believer in having a typical savings account and also investing. I keep the savings account as my emergency fund, that I have access to when needed, or for saving for a larger purchase that will happen in the near future. Outside of that, I move my savings to investments. This does not include my automated 401k plan through my employer. This is supplemental savings that I’d like to grow quicker than my lack-luster savings account interest rate provides.

Currently, the trend is to invest in Index Funds. Nearly every blogger, investment site, major personality talking about investing is talking about them. Why? They are easy to understand, easy to invest in, and provide relatively low risk and expense. In short, when you invest in Index Funds you are getting a cross section of an investment sector, it can be the S&P 500, International Funds, Large Cap (largest companies,) Small Cap (smaller companies which pose more risk, but possibly greater potential in returns) and more. The reason these funds have become so popular is that instead of betting on one company or one industry (technology for example,) you are essentially betting on that cross section of the stock market. The fund that is referred to often is the Vanguard 500 Index Fund. Historically (the past 30+ years) it has averaged 12% growth annually. That number means that if you invested $1,000, 30 years ago, it would be worth nearly $30,000 today. If you added $1,000 each year, (so a total investment of $30,000) it would be worth $270k!

Please remember this amount is averaged, when the stock market falls as a whole, the value of the fund drops as well. Most recently was the recession in 2008, however December 2018 was a crummy month in the world of investing and it would have been easy to run when values drop. So, I’m warning you of two things 1.) I’m not an investment professional, but rather someone who has interest in sharing what I’ve learned over the years 2.) Investing is not for the weak, you must be willing to weather the highs and the lows to see long term growth.

You should not invest your emergency fund, as tempting as it may be to see faster growth. You never know when you will need your emergency fund and need access to it within hours, vs days. Any money that is invested in the stock market or mutual funds, should be money that is intended for long term growth, or growth with an end date in mind. One of the easiest ways to do this is to automate your savings. You likely do this with a 401k, where it is pulled out of your paycheck before it hits your checking account. It becomes something you don’t even think about. I’ve been using STASH and Ally. I’ve automated a certain amount each week to be deducted from my checking account. You can start with as low as $5. There are several other options out there, as well. I use STASH for my Roth IRA, and Ally for investing in the stock market and mutual funds. There are other, managed options out there, too. If you have a relationship with a broker, or even the person who manages your 401k at work, please do not hesitate to reach out to that person for advice that will pertain to your situation. Everyone is different.

Below is a list of Index funds, what their expense ratios are, and a small description of what they are. If you are interested, please don’t let my blog be the end of your research before diving in. I hope it piques interest in investing, and creates a desire to build your future. Best of luck! <3 Bobbi

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