By Andy Newell, CISP, Investment Officer, Emerging Investor Market
The importance of investing for the future may be self-evident, but the actual decision to begin investing requires having some familiarity with the basic concepts and options available. At The National Bank of Indianapolis, we understand it’s not always easy to know where to begin, and we hope that this article will provide some guidance for the beginning investor. Regardless of age or experience, it is never too late to start investing. Making smart financial choices at any time during your life will maximize the chance of a positive result over your own time horizon.
While the term “investing” suggests the stock and bond markets, successful investing requires a more general definition of the term. “Investing” is nothing more, and nothing less, than allocating your available resources to those opportunities and pursuits that afford you the greatest chance of realizing your goals. With that definition in mind and for the remainder of this blog, we will walk through the first steps you should take to get started.
- Identify your financial resources. The first and most crucial step would be to identify your financial resources. That is best accomplished by establishing and maintaining a budget. A budget helps you understand your income and spending, illustrating not only how much money you might have to allocate toward investments right away but also opportunities to reduce expenditures to increase cash flow for investing.
- Identify your goals. Financial goals vary from person to person. Some examples include having enough savings to cover an emergency, paying off student loans, buying a home or car, starting a family or saving for retirement. For those just starting out, consider a balance between emergency savings, retirement savings and paying off high-interest debt.
- Consider interest. Starting retirement savings early will take advantage of compounding returns: the longer your investment horizon, the more opportunity you have for investment growth to compound on itself.
Conversely, compounding interest can work against you when it is accruing on high-interest debt, so paying off such loans early will reduce the amount that you will pay over the long-term and help to prevent the debt from becoming too burdensome in the future. Starting off on a positive financial track early is important to long-term success and financial flexibility later in life.
Having established a budget and defined goals, it is time to consider the financial tools that may be available to you. At The National Bank of Indianapolis, our investment managers at Diamond Capital Management and Market Street Fund Management are dedicated to helping you realize your goals.
To learn more about investing with The National Bank of Indianapolis, connect with our specialists at https://www.nbofi.com/wealth-management/investing/meet-our-specialists.