Stressed Out By Investing?
The Definitive Guide to Getting Started
Here’s how to develop an investment plan that works for you
People tend to live in the short term: paying each month’s
rent, buying groceries each week and filling up the tank as it
nears “E.” But financial investments exist to help make your
long-term goals just as attainable.
Unfortunately, the stereotype of investors as financial
experts with sophisticated knowledge of the markets
can make regular consumers feel unprepared to open
their own investment accounts. But as David Weliver of
MoneyUnder30.com explains, the image of investing as a
way for rich people to get even richer simply isn’t accurate.
Saving enough money for retirement
What financial issue
worries Americans most?1
“Many people invest so they might be able to stop
working, or work part time, or transition to a more
inspiring career,” he says. “It’s the best chance for
anyone to meaningfully grow the money they’ve worked
hard to earn.”
There are myriad options for investing your money in a way
that works for you. It’s as simple as choosing a goal and
creating a plan to match.
Here’s how to get started:
What would Americans
do with an extra $1,000?2
40%
31%
29%
56%
Monthly mortgage/rent bills
Invest it in the stock market
46%
Credit card debt
Educational expenses
Healthcare or insurance bills
Pay off debt
27%
Put it in a savings account or CD
41%
Put it toward a retirement fund
21%
31%
Before you do anything
Concrete goals are the key to success. Statistically, the
guy who said his New Year’s resolution was to have at
least one serving of fruit with breakfast each morning
was 10 times more likely to follow through than the guy
who simply pledged to “eat healthier.”
The same goes for finances. It’s far easier to know
how much progress you’ve made toward a $50,000
down payment on a house than it is to know if you’re
“saving money.”
RULES OF THUMB FOR INVESTING
Risk sounds scary, but some risk is necessary to
reap rewards
Take more risks for long-term goals, and be
more conservative in the short term
“Your goal can change over time, but you definitely
need direction,” says Randall Reinwasser of Solitude
Canyon Investment Advisors and author of the book
“Underground Savings.”
Stocks work best over the long term, so try
not to make snap decisions based on daily or
weekly gains and losses
“Just thinking ‘I’m going to invest and make money’
generally leads to frustration.”
Consider opening a separate savings account
to hold funds earmarked for investments
You’re likely getting into investing because you have
a specific goal or two on the radar already, but keep
evaluating these objectives as you work toward them.
Prioritizing is crucial. It’s pretty difficult to save a large
sum from each paycheck for a house, an education and
retirement, so determine what’s most important to you
today. One school of thought says the soonest event
should rank highest; another says having a nest egg for
retirement is the biggest financial need of your life and
should thus take priority.
At the end of the day, you’re the only one who can
decide what works for you. But no matter what, spend
time collecting your financial information and making
these decisions before you invest your money.
have to e
’t
n
o
d
e
“W
r than th
e
t
r
a
m
s
e
b
ve to be
a
h
e
W
.
t
s
re
ipline4d
c
s
i
d
e
r
o
m
est.”
than the r of Berkshire
or, who
uffett, CEO
–Warren B and legendary invest20135
y
in
a
r
Hathaw .5 million per hou
earned $1
What’s stopping people from
investing in the stock market?3
53%
21%
say they don’t have the money
say they don’t know about stocks
First investments
Before diving into the markets, consider investing in
yourself by paying down debt first. “Consumer debt
usually carries double-digit interest rates,” says Jacob
Lumby of CashCowCouple.com. “Paying off that debt is
equivalent to earning that interest rate in any investment
vehicle with absolutely no risk, and no investment is going
to beat that.”
house or a car. Identify a target date for when you want to
have the money saved (for example, maybe you want to be
a homeowner within five years), and construct your budget
from there.
The average credit card has an interest rate of 15 percent.
Even with a particularly remarkable investment, you’re
only likely to earn an annual return of about 7 percent. So
paying off your debt first is essentially twice as valuable.
Money market funds and low-risk bonds are great first
investment options, since they are both comparatively
safe and easily accessible. This safety is great when you’re
working toward a short-term goal, but it also means you’ll
get a lower return over time, so many investors choose to
use these channels for short-term goals but reallocate funds
for ongoing investments.
Once your credit is in the clear, start with a quantifiable
short-term goal, such as saving for a down payment on a
“If your goal is to buy a house, what matters is that your
money is there for you when you need it,” Weliver says.
at you
“ K n ow w h n ow
k
own, and n it.”6
w
why you o
d an
ch, who ha
n
–Peter Lyn return of more tha
d
is
e
h
liz
g
a
n
u
duri
ann
elity
t per year
29 percen n as manager of Fid
7
ru
13-year ts’ Magellan Fund
Investmen
$68,300
Median income of a first-time homebuyer8
To pay for a down payment on a home:
81 percent of first-time buyers used their
own savings, which they supplemented with
other sources:9
26%
Used a gift from a friend
or relative
10%
Sold stocks or bonds, or
used part of their 401(k)
6%
Used a loan from a relative
or friend
Next steps
Good financial planners start saving for their children’s
college education early. Ideally, you’ll have between 10
and 18 years to build these funds.
This time frame allows you to explore both sides of
the investment coin. The longer you have to meet your
financial goal, the more aggressive you can afford to be.
But again, the closer you get to the goal, the better it is
to know your money will be available when you need it.
Consider taking on higher-risk investments like U.S. and
international stocks for a few years, then redistributing
your money into a more conservative allocation, such as a
stock and bond mix, as the target date approaches.
529 plans are also terrific options for college savings.
Each state offers an individualized plan that rewards you
for planning for your child’s education. Most states have
“savings plans,” which invest your contributions in mutual
funds (in the same vein as an IRA), and “prepaid plans,”
which let you prepay the cost of college so you can pay at
today’s rates.
“These are good options because your contributions
compound tax-free,” says Laurie Itkin, founder of
TheOptionsLady.com. “And withdrawals for educationrelated expenses are tax-free too.”
Each state’s 529 plan is a little different, and you can
select whichever one you want, so feel free to take a look
at plans across the country. But as Reinwasser explains,
states know this, so they often offer residents benefits
for choosing their plan. “If your state gives an income tax
deduction for 529 contributions, I wouldn’t hesitate to
use that one,” he says. “Otherwise, you’re free to use any
state’s plan—and there’s a significant difference in the
quality of the plans available.”
Average cost of college:10
$32,762
$18,943
Amount per year to attend a public
university outside of your home state
Amount per year to attend a public
university in your home state
$15,346
Amount the average family has saved for college
The best-planning families
began saving for college
before their child turned 611
“Do you
homewor
all your rk
life.” 12
–Mu
riel
1967 be Siebert, who in
woman came the first
New Yorkto head one of
member Stock Exchangthe
e’s
firms 13
The long haul
“The longer your investing horizon, the more hands-off
you can be,” Weliver says. “It’s just a matter of investing
as much as you can each year and making small tweaks
once a year to ensure your money is still allocated
appropriately.”
Retirement is the biggest milestone you will save for
throughout your life. So it’s important to plan ahead—
and that means long before you reach retirement age.
If you have a 401(k) or an IRA from your employer, use
that to its fullest extent. An alarming 19 percent of eligible
baby boomers don’t take advantage of these employerprovided vehicles. As people live longer, they’re spending
a larger portion of their lives in retirement, so it’s in your
best interest to maximize your savings.
The other major long-term investment vehicle is none
other than the stock market. Stocks may be the most
outwardly intimidating, but they offer the largest potential
rewards. That’s why it’s best to view them in the big
picture, focusing on the overall success of your portfolio,
rather than panicking over a two-week drop in the market.
Many people got nervous and withdrew their money from
the stock market during the crash of the Great Recession,
but by and large, those who waited it out earned their
money back—and then some.
“You don’t want to risk losing most of your money without
sufficient time for the portfolio to recover,” Lumby says.
“So invest to reach your long-term goals. Even when there
are turbulent times, the stock market has always recovered
and moved even higher.”
78%
percent of employers that match
employee contributions to retirement
funds to at least some degree14
23%
percent of boomers with 401(k)s
or IRAs who have taken a loan out
against their retirement account or
made an early withdrawl14
63
Age the average American retires15
36%
38%
Percent of Americans who don’t save
anything for retirement15
Percent of Americans who rely
completely on Social Security for their
retirement-age income15
Median 401(k) balances by age:16
Under 25
25-34
35-44
45-54
55-64
65 and
older
$1,580
$10,272
$27,747
$52,236
$76,381
$72,957
The big takeaway
Earning money as an investor goes beyond the mania of
Wall Street. It includes savings and checking accounts,
your 401(k) and college savings plans. Investing is
not only the domain of Gordon Gekko and Warren
Buffett: Regular people invest and reap the rewards of
investments every day.
For more tips on getting started with investing,
supercharging your savings and mastering the art of
money management, subscribe to the onUpdates
newsletter from SunTrust today!
is like a
“Investing good
tax—but a efits
n
tax that be
.”
you directly
liver,
–David We der30.com
n
M o n ey U
Success Story:
“When I was 24, I
received a $1,600
inheritance from my
grandmother. I bought
40 shares of stock. As it
started growing, I felt so
empowered that whenever
I received a raise, I maintained my same
standard of frugal living and invested
the rest. It was about living below my
means in the short run so that I could be
comfortable in the long run. Sure enough,
by the time I turned 40, I had a million
dollars between my 401(k), IRAs and
brokerage account.”
–Laurie Itkin, TheOptionsLady.com
SunTrust Bank and its affiliates and the directors, officers, employees and agents of SunTrust Bank and its affiliates (collectively, "SunTrust") are not
permitted to give legal or tax advice. Clients of SunTrust should consult with their legal and tax advisors prior to entering into any financial transaction.
Investment and Insurance Products: Are not FDIC or any other Government Agency Insured; Are not Bank Guaranteed; May Lose Value.
SunTrust Private Wealth Management is a marketing name used by SunTrust Banks, Inc. and the following affiliates: Banking and trust products and
services, including investment advisory products and services, are provided by SunTrust Bank. Securities, insurance (including annuities) and other
investment products and services are offered by SunTrust Investment Services, Inc., an SEC registered investment adviser and broker-dealer, member
FINRA, SIPC, and a licensed insurance agency.
Sources:
1. “Poll: Americans sleeping better as economy recovers,” June 24, 2015, CreditCards.com
http://www.creditcards.com/credit-card-news/financial-worries-losing-sleep.php
2. “How Would You Spend an Extra $1,000?” February 2013, Kiplinger
http://www.kiplinger.com/article/retirement/T037-C015-S001-how-would-you-spend-an-extra-1-000.html
3. “Did you miss the stock market rally? You’re not alone,” April 9, 2015, Bankrate
http://www.bankrate.com/finance/consumer-index/money-pulse-0415.aspx
4. “Value Investing Explained in 7 Quotes,” July 29, 2014, The Motley Fool
http://www.fool.com/investing/value/2014/07/29/value-investing-explained-in-7-quotes.aspx
5. “Buffett’s wealth soared $37 million a day in 2013,” Dec. 18, 2013, CNBC
http://www.cnbc.com/2013/12/18/buffetts-wealth-soared-37-million-a-day-in-2013.html
6. “Know what you own and know why you own it,” March 27, 2000, The Guardian
http://www.theguardian.com/money/2000/mar/27/1
7. “Investing Lessons: Avoiding the Peter Lynch Bias,” Nov. 20, 2012, Forbes
http://www.forbes.com/sites/moneybuilder/2012/11/20/investing-lessons-avoiding-the-peter-lynch-bias/
8. “Presentation: Profile Types of Home Buyers,” Nov. 17, 2014, National Association of Realtors
http://www.realtor.org/presentations/presentation-profile-types-of-home-buyers
9. “NAR Annual Survey Reveals Notable Decline in First-time Buyers,” Nov. 3, 2014, National Association of Realtors
http://www.realtor.org/news-releases/2014/11/nar-annual-survey-reveals-notable-decline-in-first-time-buyers
10. “College prices continue to inch higher,” Nov. 3, 2014, PBS NewsHour
http://www.pbs.org/newshour/rundown/sticker-price-college-continues-inch-higher/
11. “How America Saves For College 2014,” Sallie Mae
http://news.salliemae.com/research-tools/america-saves-2014
12. “Muriel Siebert: Commencement Address at Case Western Reserve, 1998,” March 21, 2006, Graduation Wisdom
http://www.graduationwisdom.com/speeches/0009-siebert.htm
13. “Muriel Siebert, a Determined Trailblazer for Women on Wall Street, Dies at 84,” Aug. 25, 2013, The New York Times
http://www.nytimes.com/2013/08/26/business/muriel-siebert-first-woman-to-own-a-seat-on-wall-st-dies-at-80.html?_r=1
14. “5 Frightening Retirement Statistics That Demonstrate Baby Boomers Are in Serious Trouble,” April 19, 2015, The Motley Fool
http://www.fool.com/retirement/general/2015/04/19/5-frightening-retirement-statistics-that-demonstra.aspx
15. “Retirement Statistics,” April 8, 2015, Statistic Brain
http://www.statisticbrain.com/retirement-statistics/
16. “How America Saves 2014,” June 2014, Vanguard
https://pressroom.vanguard.com/content/nonindexed/How_America_Saves_2014.pdf