We’re expecting to receive a big packet from human resources with all the options and benefits that our employers’ offer. While I won’t say that this is an exciting thing, we are eager to go over our benefits because we’re aware of how much this can affect our retirement. Employers typically give a couple of weeks for employees to decide if they want to make changes to their plans.
We actually made a huge change with our health insurance a few years ago that’s so far been a big boost. Not only are we paying less in premiums, but we’re building up some serious savings for retirement and lowering our taxable income now!
How to Get the Most out of Your Benefits Plan
The key for us was setting aside some dedicated time to go over each of the benefits offered and running the numbers ourselves. It amazed us of how much we could either save right now or stashed away later based on what we signed up for. It is a bit of an investment of your time, but if you set aside a day to knock this out, you’ll not only be saving money now, you can give yourself a huge leg up with your retirement later!
Let me show you how you can get the most out of your benefits plan by going over two key areas that affect families the most – your health insurance and 401(k) plans.
Keeping Your Health Insurance Affordable
One of the biggest expenses families face is healthcare. Right now the average premium for family plans is over $1,100 a month! Even if you are relatively healthy, those monthly premiums for your health insurance plan is probably a huge chunk out of your paycheck.
We’ve seen this happen with our own paychecks. When it was just the two of us, the premiums were doable, but after having kids, it felt like every year it kept climbing. It would be one thing if we used our insurance regularly, but for several years, it’s been pretty much only well visits. While we’re certainly grateful for that, it’s honestly a bit frustrating to see such a large amount withdrawn for something we hardly used.
When our monthly premiums for a basic family plan were going to go up to pretty much our monthly mortgage payment a couple of years ago, we knew it was time to switch.
How High Deductible Plans and Health Savings Accounts Work
My husband’s company offered a high deductible plan with an HSA and after running the numbers we made the switch. With our old PPO plan, we had a lower deductible, but that meant our monthly premiums were high.
The high deductible plan is the opposite. You pay less in premiums, but you’re on the hook with a higher deductible. A high deductible plan can make sense for families who typically don’t have a lot of visits to the doctors and little to no prescriptions. Here’s where you can save money now and for retirement with a high deductible plan.
With this type of plan, you can open up a health savings account (HSA). This account can be a huge win tax time now and when you retire. How? When you contribute towards your HSA, that lowers your taxable income now. That money grows tax-free and when you withdraw, it’s tax-free as well!
Your contributions roll over and can continue to grow year after year. So if you’re healthy and don’t have to use it, it’s a really helpful account for your health-related expenses during retirement. If your family does have regular medical expenses or prescriptions, then you may want to look at getting your standard plan and having a flexible spending account.
You can set aside pre-tax dollars for your medical bills. The key thing to remember is that you need to use your account every year because if you don’t you lose the money you allocated for it. So review what you’ve been paying for your medicine, glasses, and other medically related items to get an idea of what you want to save up for.
Whatever option you choose,please make sure you understand the out of pocket expenses for your family.
How to Make Sure Your 401(k) is Working as Hard as You Do
Alright so we covered the big expense of health insurance, let’s look at the other area you need to nail with your benefits – your 401(k).If you’re like most American families your 401(k) is the main account you use to save for your retirement. This qualified retirement account gives you the ability to invest in a tax-advantaged basis.
With a traditional 401(k), you put your money pre-tax, which means you’re lowering your taxable income now while saving for later. If your company offers a Roth 401(k), your contribution is coming out with after-tax dollars the benefit would be when it’s time to withdraw down the line when it’s tax-free.
Now what can sweeten the deal (even more)with your 401(k) is if your employer offers a match. If you put in a certain percentage of your income, they will contribute something as well. This is a huge win and consider it more than free money – it’s part of your compensation package (it’s yours to claim!).
The sooner you start with your 401(k) contributions, the more you can take advantage of that match and compound interest.
Keep Your 401(k) Fees in Check
Since your objective is to maximize growth within your risk tolerance, you want to stay on top of your 401(k).Focus on making sure you minimize needless fees and look for investments that match your specific goals and risk tolerance.
Going with a target-date fund or an index fund can give you the diversified portfolio you need and still keep it manageable.
By creating an investment plan, automating your contributions, and simply checking in from time to time to make sure things are with your tolerance, you’ll be ahead of most people.
Your Take on Maximizing Your Benefits
I hope these tips make it easier to figure out what the best options are for you with your benefits. With your health insurance and 401(k) squared away, you’re in a much stronger position for retirement!
If you have any questions, please leave them in the comments below.
When you are retired or near retirement, it is generally a good idea to have a percentage of your savings in investment vehicles that are lower in risk. However, it can be difficult to find low-risk, high-return investments — especially now with certificate of deposit (CD) and savings account rates at less than 1 percent.
Not too long ago, retirees could earn sufficient interest in low-risk savings vehicles that could keep money protected while allowing adequate growth. But today’s extremely low rates make that nearly impossible. And rates are not expected to rise any time soon. In fact, the Federal Reserve has promised to keep rates low through 2023 to support economic recovery.
At any rate, there is more to consider than just returns.
There Is More Than Just Low Risk and High Return to Consider
The rate of return or interest rate is what most people are concerned about when considering a low-risk, high-return investment. However, there are other factors that may make different investment options more or less attractive. Before we talk about specific investment options, let’s look at six things to consider in addition to the rate of return.
Liquidity and Your Time Horizon
How soon do you need access to the money? Do you need the money to be liquid — available at any time?
With any investment, it is critically important to factor in the fees. Fees can eat up your returns and are often hidden.
Some investment vehicles have a minimum amount you need to invest. Certain account types also may come with a maximum investment.
The Inflation Rate
If your return on your money is not greater than the rate of inflation, then you are not actually earning real returns. Inflation is a sneaky factor to consider with regard to your rate of return. You should always think in terms of your “real” rate of return, which is your return minus the inflation rate.
Is Investment Designed for Income or Growth, and Is That What You Need?
Sometimes you will want to make a low-risk, high-return investment that is designed to pay you an income. Other times, you simply want your money to appreciate for withdrawal at a later date.
Your Overall Asset Allocation and Specific Needs
Many people around retirement age are fearful of keeping too much money in the stock market. But, the stock market is one of the best ways to grow your money for the long term and should be included in your portfolio — though preferably in the form of funds.
There are various rules of thumb for determining your best asset allocation between high-risk, high-return and low-risk, low-return investments and everything in between.
However, the most personalized way to determine your optimal asset allocation is to create detailed spending projections to determine how much money you will need and when and for what kinds of expenses. You will want the money that you absolutely need to spend in the near term in low-risk vehicles (with the highest returns possible) and money that you will want in the future can be invested with higher risk, potentially capturing higher returns. The NewRetirement Planner is designed to help you figure this out.
14 Low-Risk and High-Return Investments
So, where should you keep money that you want to protect from risk while earning adequate returns? I have got some bad news: There is really no such thing. You can’t have your cake and eat it too.
However, keep reading for some options for lower-ish risk, higher-ish return investment options.
1. Keep Money in the Bank
According to the FDIC, the national average interest rate on savings accounts currently stands at 0.05% annual percentage yield (APY) (compare that to the average stock market return over the last 100 years of 10%). The 0.05% APY applies to both average and jumbo deposits (balances over $100,000).
That being said, there is a lot of competition in the marketplace for cash savings, and you can find higher rates. But, this is overall not a low-risk, high-return investment. Consider it more of a low-risk and low-return opportunity.
How low? Well, if you had $50,000 in an account earning a 0.05% APY, then you would only earn $125.13 over a five-year period.
2. In High-Yield Savings Accounts (HYSAs)
A high-yield savings account (HYSA) is a type of savings account that pays significantly higher interest — 20 to 25 times the national average. Many of the best rates on HYSAs can be found from online banks.
If you were to earn a “good” rate of return on an HYSA, then you might earn 0.50% APY. This is significantly more than the 0.05% APY you might earn from a traditional bank. So, your $50,000 would earn $1,265.49 in five years ($1,000 more than in a traditional bank).
3. In Money Market Accounts
A money market account is a savings account that can also function as a checking account and typically comes with a debit card with unlimited transactions.
Money market accounts typically offer higher returns than what a bank offers on a typical checking account. A pro and a con is that the money is very available for withdrawal — good if you want the asset to be liquid, bad if you are trying to save the money. It may be too tempting not to touch it.
A typical APY on a money market account is 0.30% to 0.50%.
4. In Cash Management Accounts
A cash management account is another variation of other savings accounts and is typically offered by brokerage firms and robo-advisers.
Current APYs on cash management accounts are around 0.50%.
5. With a Credit Union
According to MyCreditUnion.gov, “Credit unions are not-for-profit organizations that exist to serve their members. Like banks, credit unions accept deposits, make loans and provide a wide array of other financial services. But as member-owned and cooperative institutions, credit unions provide a safe place to save and borrow at reasonable rates.”
Credit unions typically provide higher interest rates on cash accounts than banks. You will also typically pay lower fees for ATMs and other services.
However, always read the fine print. Many of the offers from bank/credit unions that have attractive rates either cap the balance that is available for the rate and/or require you to create a checking account and actually use their product for a certain number of transactions per month. And the caps can be really low ($3,000–$5,000).
6. In a Certificate of Deposit (CD)
A certificate of deposit (CD) is a financial product that restricts your access to your money for a specified period of time. For that restriction, you are rewarded with a better return than with traditional savings accounts.
Current rates are around 1.05% APY for a five-year term, and there is typically a minimum investment required.
7. Move Money Around Based on Incentives and Perks
You probably have a friend who changes credit card accounts frequently to take advantage of all the perks that are offered with various cards. This is often referred to as “churning.”
Well, if you’re willing to move your money around and keep track of all requirements, cash bonuses for opening, interest rates and duration, you can do something similar with cash accounts. For example, Capital One had an offer recently where you could receive $400 for opening a new checking account and have two automated deposits of at least $1,000 in 60 days.
Please note that NewRetirement has no affiliation with Capital One and the above example may no longer be available.
If you do a few of these a year, it is worth more than any high-yield savings account returns, but with many hoops to jump through.
8. In U.S. Savings Bonds
A bond represents a loan an investor makes. When you invest in a bond, you are guaranteed a specified return and your principle will be paid back on a predetermined date. Your returns are paid as interest and are not based on profits.
The vast majority of bonds that are bought and sold are done so through the secondary market, meaning between an investor to another investor, and not from the original borrower to an investor.
Government bonds typically offer slightly better interest rates than a savings account, without a lot of additional risk. U.S. Treasury bonds are backed by the federal government, meaning that you are most certainly assured you will get your money back. If you don’t, then the dollar probably doesn’t exist at that point, and we have much bigger problems to deal with.
Your returns are determined by how long you hold the bond. Current returns are around 0.03% for a one-month duration and 2% for a duration of 30 years, but these numbers can vary significantly.
As a comparison, since 1926, large stocks have returned an average of 10% per year while long-term government bonds have returned between 5% and 6%, according to investment researcher Morningstar.
The face value of a bond also changes as interest rates change. As interest rates go up, your bond would be worth less on the secondary market, as you have a lower interest rate than is otherwise available. If interest rates go lower (and in our case, negative, such as in Germany), your bond would be worth more.
Some state-government bonds also are tax-sheltered in the state that they are issued in, which might make them interesting to those of us in high income-tax brackets.
9. In Corporate Bonds
A corporate bond is a bond issued by a company rather than a federal, state or local government. They are considered to be a relatively safe investment, though far riskier than government-backed bonds.
Corporate bonds are reviewed for creditworthiness by rating agencies like Standard & Poor’s and Moody’s. Bond ratings are used to inform you about the stability of the bond in question, and the ratings help determine the interest rates that are paid.
Bonds with lower ratings, such as junk bonds and below-investment-grade bonds may have higher returns, but carry with them a much higher risk of default. Some bonds can even be called, meaning the borrower can elect to pay off the bond early. This occurs when the borrower can borrow funds from a different source at a lower interest rate. Always read the fine print.
10. Invest in a Fund
An investment fund is a portfolio of assets — usually stocks and/or bonds. Instead of investing in or lending to one company, you are investing in a group of companies, which spreads your risk.
There are many types of funds. and some may be better than others as a low-risk, high-return investment. Let’s take a closer look at five options:
An index fund is a concept that was invented by John Bogle, founder of Vanguard, as part of his thesis at Princeton. If you think successful long-term investing is about picking just the right stocks, think again. Bogle’s genius was not in knowing which stock to buy, but rather in knowing that some stocks will gain and some will lose but the overall market will gain over the long term.
An index fund is an investment made in an entire market, not individual sectors or companies. As Bogle famously said, “Don’t look for the needle in the haystack. Just buy the haystack.”
Index funds are also cap-weighted. This means that companies are held in proportion to their valuation. Large companies, such as Apple, are heavily weighted, while smaller companies are less so.
Stable Value Funds
Stable value funds are a portfolio of bonds that are insured to protect the investor against a decline in yield or a loss of capital. They are a common low-risk investment option inside of many 401(k) plans (there is very limited availability outside of 401(k)s).
Stable value funds are a portfolio of bonds that are insured to provide the investor with a reasonable guarantee of return (though they are not insured by the FDIC) of principal. And, as the name says, they return a stable rate of interest.
The interest rate is typically a few percentage points above money market funds. However, beware of fees.
Target Date Funds
A target-date fund (also known as a life cycle fund or age-based fund, or even abbreviated as a TDF) is an investment fund that automatically changes your investment portfolio from high-risk, high-reward to low-risk, low-reward options as you near your target date — the date when you want the money to be available to you for withdrawal.
The target date is usually identified in the name of the fund. So, if you want access to the money in or near 2045, you would pick a fund with 2045 in its name.
There are various pros and cons associated with target-date funds. You will definitely want to assess the fees on the investment. And, know that your money can be at risk and that you can’t take it out before the target date.
What if you think a certain TDF is too conservative? Then use a TDF with a date further down the line than when you want the money. This way, you will have a higher percentage of stocks for longer.
How about if a TDF is too aggressive for your taste? Do the opposite: choose a TDF with a date nearer than when you expect to use the money.
Real Estate Investment Trusts (REITs)
A real estate investment trust (REIT) is a fund of properties — typically income-producing assets like apartment buildings and hotels.
Tax-Exempt Mutual Funds
A tax-exempt mutual fund is a fund composed of investments that generate tax-free interest. These funds are offered by some investment firms.
To benefit from a tax-exempt mutual fund, you will need to invest outside of any tax-advantaged account and be in a higher tax bracket.
11. Look at Ladders
Investopedia defines laddering as “Buying multiple financial products of the same type — such as bonds or CDs — each with different maturity dates. By spreading their investment across several maturities, investors hope to reduce their interest rate and reinvestment risk.”
Learn more about bond ladders.
12. Consider Annuities
An annuity is an insurance product that guarantees income. They are popular with retirees who want to be assured that they will get a certain amount of income over a specified period of time.
In fact, according to a Towers Watson Retirement Survey, having predictable retirement income (presumably adequate income to cover all of your expenses) can help you feel happier. Conversely, the researchers discovered that retirees who must withdraw money from investments to pay for retirement expenses had the highest financial anxiety.
There are a lot of variations to consider when purchasing an annuity, but the following are a few popular options for retirees looking for income.
When you buy an annuity, you are exchanging a lump sum of money for an agreed-upon income stream to be paid over an agreed-up term.
The income stream can be variable — the amount you get varies each month along with interest rates or investment returns. Or, the income stream can be fixed — the amount you get remains the same no matter what is going on with the financial markets.
Fixed annuities are appealing to retirees because they transform your savings into predictable income.
You also specify the term of an annuity, payments can last for a specified number of years, or your lifetime — no matter how long that turns out to be.
Guaranteed Lifetime Annuities
A guaranteed lifetime annuity is a specific type of fixed-term annuity and is ideal for retirement. When you purchase this type of annuity, you are getting a guaranteed paycheck for as long as you live — no matter how long that turns out to be.
Multi-Year Guaranteed Annuities (MYGA)
A multi-year guaranteed annuity (MYGA). It is similar to an n-year Certificate of Deposit except that it is issued by an insurance company, instead of by the FDIC. It has a fixed interest rate (such as 3%) and you would have to hold it for “n” years (where “n” equals five years, for example). After five years, you get your investment plus the interest over that period of time. You can surrender it sooner but then there is an early withdrawal penalty.
They are not FDIC insured but do have some protection from your state’s insurance guaranty program (if the company should fail). Today, a five-year MYGA is going for about 3%. These products often have a minimum to invest (such as $10,000) and can be “surrendered” after that time period with that full rate of return.
13. Be Wary, but Just Go With Stocks (Lower-Risk Stocks, Anyway)
Low-interest rates can force investors into riskier securities. While there are absolutely zero guarantees with stocks and you could potentially lose all of your money with even the most conservative stock investment, there are stocks that are less risky than others.
If you think you can tolerate a stock investment for a low-risk (well … at best it is probably a medium risk) high-return investment, consider the following two possibilities:
There are two types of stock — common and preferred. Preferred stock trades like common stock, but act somewhat like bonds. Preferred shareholders have a higher claim on dividends than common stockholders, and, in the event of liquidation, have a preferred claim on assets over common stockholders — but less than bondholders.
Dividend-Paying Common Stock
In general, companies paying dividends tend to be higher quality with stronger balance sheets and less risk. And, even though they have less volatility, they outperform non-dividend-paying stock over time as well.
They can return an average yield of 3% plus capital appreciation.
14. Paying Off Your Mortgage
Paying off your mortgage and eliminating all debt can be a pretty good low-risk, high-return investment.
For example, if you have a mortgage at 3%, you could effectively earn 3% interest on the value of the mortgage balance because it is no longer subject to interest.
Plus, it will improve your cash flow.
When it comes to getting advice from Certified Financial Planners (CFPs), it’s usually not in their best interests to recommend you pay down your mortgage. Why?
Most CFPs are paid on a percentage of assets managed (AUM). The more assets they manage, the more they take home. Diverting funds from your portfolio to pay down your mortgage inherently means that your CFP will earn less money. This is why looking for an adviser paid on an hourly basis keeps you and your adviser aligned.
Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.
January 19, 2019Posted By: growth-rapidly Tag: Buying a house
Buying a house is perhaps the biggest and most expensive decision you’ll ever make in your life. So it’s surprising how many people don’t shop around for several lenders when buying a house. Not doing so can cost you a lot of money in mortgage monthly payments and interests over the life of the loan. That’s why it’s crucial to learn how to save thousands on your mortgage.
Even when you shop and compare rates from multiple lenders, there are other factors to consider.
In no particular order, here’s how to save thousands on your mortgage before you apply for a mortgage loan:
Related: Apply for a Mortgage Loan
1. Compare mortgage lenders
The main mistake you can make when buying a house is to stick to one mortgage lender for your loan. This is one mistake that can cost you thousands of dollars in mortgage interests. You should always shop for several mortgage lenders and compare their interest rates, fees, etc… Doing so will allow you to make the best decision and save you money on your mortgage. You can check rates on LendingTree to compare offers from multiple lenders, all in one place.
2. Raise your credit score.
A good credit score is not only going to help you get qualified for a mortgage loan but it will also help you get the best interest rate. A good credit score says to the mortgage lenders that you’re responsible with credit and you will unlikely default on the loan. So the higher your credit score, the better.
Before you can take steps to improve your credit score, you should check your credit score to know where you stand. There are several free credit monitoring services where you can check your credit score. My favorite is MyFreeScoreNow . It provides a free credit report and free credit score.
After you have check your credit score, take steps to improve it. One way to raise your credit score is to pay your bills on time. Payment history accounts for 35% of your overall credit score, so it’s important that you don’t have any missed payments. Another way to raise your credit score is to keep your credit card utilization rate below 30%.
Click here for more tips on how to raise your credit score to 850.
3. Put 20% down payment or more.
The typical down payment on a house is 20 percent of the home purchase price. However, most people nowadays, especially first time home buyers with little savings, put down as little as 3% down. This can be good if you have little savings. However, if you want to save on your mortgage, you should consider putting 20 percent down or more. The main reason why is that the more you put down, the less you’ll have to borrow and the more you will save in interest.
Also, when you put at least 20% down payment, you will avoid paying private mortgage insurance (PMI) – a PMI insures the lender in the event you default on the loan. Thus, saving you more money on your mortgage. Moreover, putting 20 percent down payment might help you qualify for a lower interest rate, which then allows you pay less in interest over the life of a loan.
Related: How to Save Money For a House Fast
4. No big purchase until your mortgage finalizes.
It only makes sense to shop for new furniture and new home appliances when buying a house. However, wait until your mortgage loan has finalized before you put big purchases on your credit. Making a big purchase may affect not only your chance of getting a mortgage but also can affect the cost of your mortgage.
5. Don’t apply for new credit.
Similarly to point # 4, do not apply for new credit – like new credit cards and/or personal loan – while in the midst of applying for a mortgage loan. You see, the number of times your credit is pulled, the more inquiries are added to your credit report. That means the more inquiries you have the lower your credit score will get, which can then affect the interest rate of your mortgage loan.
In conclusion, a mortgage loan is a major financial decision, so don’t rush to do anything and make sure you shop several lenders to compare the rates and fees. Doing so will help you save thousands of dollars in interests.
Click here to shop several lenders to compare rate and fees.
More on Mortgages
Working With The Right Financial Advisor.
You can talk to a financial advisor who can review your finances and help you reach your goals (whether it is paying off debt, investing, buying a house, planning for retirement, saving, etc). Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
Tools to Grow Your Savings
1. CIT Bank Savings Builder. If you’re looking to earn great interest on your hard earned money, then try CIT Bank Savings Builder. CIT Bank offers 2.45% APY, 25 times better than what a typical savings account is offering. You’ll need only $100 to open an account.
2. CIT Bank’s Money Market Account. CIT Bank’s money market account offers an impressive 1.85% and only requires $100 to open an account. This is better than most money market accounts out there. Check out CIT’s High-Yield Money Market Account.
3. Acorns. If you want to invest your spare change, then Acorns is right for you. Acorns rounds up your spending to the nearest dollar every time you make a credit card purchase and invest the difference in index fund and ETFs. You’ll get $5 Bonus when you sign up using my link.
4. Digit. If you have little money to save, then try Digit. Digit, one of the best apps for saving money, finds extra money in your budget and save that money for you automatically.
When it comes to growing your money, sometimes what you do or do not invest in matters as much as how well your investment performs. It’s not just about risk, it’s about personal values. In this modern era, we have the unique opportunity to not only feel good about our portfolio returns, but also what we invested in and how we achieved those returns. That is precisely why sustainable investing is gaining popularity as investors increasingly seek to align their investments with their personal values and seek to work with financial professionals who not only understand them as an investor, but also as a value-driven individual.
One way to accomplish this goal is to use an investment approach that focuses on environmental, social and governance (ESG) criteria. An ESG lens considers issues such as climate change, pollution control, gender equality and diversity, human rights or corporate board composition. ESG-aware investing pursues opportunities by managing risks associated with corporate actions, policies and trends related to things like sustainable business, environmental impact, societal and community contributions, DI&E (diversity, inclusion and equity practices) practices and the demonstration of sound corporate governance.
Since the 1960s, sustainable investment strategies have shifted from an exclusionary approach to an inclusionary one. Over time, this shift has broadened the supply of investment offerings to meet growing investor demand. Interest in sustainable investing accelerated significantly in the 2000s. According to a recent McKinsey & Company study, assets in these types of investments grew by an estimated 38% from 2016 to 2018 in the U.S., rising from $8.7 trillion in 2016 to $12 trillion in 2018. Globally, sustainable investments total $23 trillion, which represents 26% of all professionally managed assets.
Debunking 2 Myths about ESG Investing
A common misconception is that sustainable investing — including ESG-driven strategies — imposes hurdles on performance. After all, aren’t most companies more motivated by profits than they are values? You might be surprised to find out reality is quite the contrary. Thankfully, you do not need to throw ethics and values out the window to achieve good returns. Studies of longer-term historical performance suggest that ESG strategies have performed similarly to comparable traditional investments on an absolute basis and a risk-adjusted basis. Remember, though, sustainable investment strategies do come with risks, like any investment.
Another misconception is that demand is being driven mainly by younger investors. Yet, research suggests that investors across generations are interested in sustainable investing. While Millennials are apt to discuss sustainable investing with their financial advisers, other generations have expressed interest as well. A 2020 Wells Fargo/Gallup survey found that 82% of surveyed investors showed interest in choosing investments based on the environment, human rights, diversity, and other social issues — if those investments provided returns similar to the market average.
One interesting case in point: Thompson Reuters, under the corporate brand Refinitiv, created an index to transparently and objectively measure the relative performance of companies against factors that define diverse and inclusive workplaces. The index ranks more than 7,000 companies globally and identifies the top 100 publicly traded companies with the most diverse and inclusive workplaces, as measured by 24 metrics across four key pillars: diversity, inclusion, people development and news and controversies. Not only have these companies scored well, but the index has outperformed the Thompson Reuters Global Total Return benchmark, demonstrating that diversity and inclusion can also lead to profitability. Perhaps values really can drive growth!
A Growing Investment Sector
Industry professionals predict that sustainable investment choices for investors will continue to expand. In fact, some analysts predict that ESG factors could become a normal consideration of most investment strategies, particularly those intended for younger investors who tend to expect greater transparency from their investments. In fact, it may surprise you to know that today, sustainable investing accounts for about $1 out of every $3 under professional management in the U.S.
If you are new to socially responsible investing, a good idea is to seek an adviser with expertise in SRI and ESG investing. While most advisers remain investment agnostic, acknowledging that either an S&P 500 index fund or a socially responsible green fund can accomplish your objectives if that is what fits best, some practitioners have chosen to specialize more in this area. Advisers helping consumers interested in values investing may perform rigorous invest selection and screening processes that not only support optimal performance but also measure the societal and environmental impact of the firms themselves.
Find an adviser who is confident about utilizing traditional vehicles, but passionate about finding unconventional ways to accomplish your goals, especially if doing so better aligns with your personal beliefs. The right adviser’s role should be simple: to understand not just where you want to go, but who you are and what values you have so that he/she can examine all the appropriate options that can fit and empower you to move forward.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
Founder, Vice President, The Haney Company
Brian Haney is proud to say he was recently voted (by his daughter) to the illustrious title of “World’s Most Embarrassing Dad!” So that’s his full-time gig, but he also masquerades as a Certified Income Specialist, advising clients on how to achieve the retirement of their dreams. Founder of The Haney Company, Brian is a speaker and also the author of “The Retirement Income Pyramid,” your retirement income road map.
When it comes to student loans, my husband and I have opposite stories. While my tuition was partly paid for by my parents and scholarship money, the rest came from $24,000 in student loans. My husband, on the other hand, sailed through school without taking on a single penny of debt.
That’s because his family had been saving in a college fund for most of his life. While I was struggling to make student loan payments and living on a shoestring budget after graduation, he was focusing on his passions and living comfortably on a more modest income than mine.
September is College Savings Month, so here are some of the best ways to save for your child’s college expenses – and how to get them involved in the process.
Types of College Saving Accounts
Start a 529
A 529 is a savings account specifically used for education-related expenses. Parents can contribute money to a 529, invest the proceeds and receive a special tax break.
The 529 is a popular option for parents because many states offer tax credits or deductions on contributions. The tax credits vary depending on where you live. For example, Indiana provides a $1,000 tax credit if you contribute $5,000, while Arizona residents can take a $5,000 deduction for individuals or $10,000 for families.
There are seven states that don’t allow any tax credits or deductions, including California, Delaware, Hawaii, Kentucky, Maine, New Jersey and North Carolina.
529 contributions are not deductible on your federal taxes. If you live in a state without income tax, then opening a 529 won’t help you save money on taxes.
529 funds can only be spent on education-related expenses, including tuition, fees and textbooks. If that money is spent on ineligible fees, the family will have to pay a 10% penalty on their taxes. Traveling to and from college, paying for study abroad expenses and school supplies are some examples of non-qualified expenses.
Because you can invest money in a 529 like you would invest in a retirement account, your contributions can grow over time. You can invest those contributions in an index fund or mutual fund.
Many 529 providers allow you to create a personalized URL so other people can add money to the account. For example, you could send out this link before Christmas or your child’s birthday to encourage grandparents and other relatives to make a 529 contribution instead of buying toys.
Anyone can save in a 529, even if they’re not a parent, guardian or direct relative. Plus, they’ll also get the tax credit or deduction.
Each state creates its own annual limit for 529s, and they range from $235,000 to $529,000. Because the limits are so high, you don’t generally have to worry about exceeding them.
Parents who live in states without 529s can contribute to a Roth IRA. Contributions are tax-deferred, and there’s no penalty for taking withdrawals for college expenses.
The annual contribution limit in 2020 for a Roth IRA is $6,000.
Encourage Your Child to Save
Making your child help save for their own education will teach them a valuable financial lesson. It will show them the importance of putting away money regularly and the patience of saving. If they have a part-time job, encourage them to put a percentage of that money toward their college fund.
If they get birthday or Christmas checks, convince them to deposit most of it in their college fund. Remember, your kids will barely remember the presents they got for Christmas, but they will remember when they apply for college and have to pay tens of thousands of dollars for tuition. You could incentive their savings habit by matching every dollar they put in.
Make Saving Automatic
Putting money away for college is similar to saving for retirement or any other long-term goal. It’s easier to save if you make it an automatic process. Most 529s, IRAs and other accounts let you set up automatic contributions from your checking or savings account.
Choose an amount you’re comfortable contributing every month. If you’re saving in a 529, try to save at least enough to get the maximum tax deduction or credit.
Open a Cash-Back Card
Instead of using a credit card to earn miles or other cash-back rewards, open a credit card that specifically helps you save for a 529. Here are a couple options:
Fidelity® Rewards Visa Signature® Card
The Fidelity® Rewards Visa Signature® Card provides 2% cashback on all purchases, and cardholders can transfer that cashback toward a Fidelity 529 account. If you spend $1,000 a month with the card, you’ll earn $240 a year in cashback.
There’s no limit on how much cashback you can earn, and there’s no annual fee. You’ll have to create a Fidelity-sponsored 529 account if you don’t already have one.
Upromise Mastercard from Barclays
The Upromise Mastercard offers 1.25% cashback on all purchases and provides a $100 sign-up bonus if you spend $500 within the first 90 days.
If you link the card to a 529 College Savings Plan, the cashback will receive a 15% bump. If you spend $1,000 a month, you’ll earn $172.5 in cashback rewards annually.
This card also comes with a round-up feature where you can round every transaction to the nearest dollar. The difference will be placed in your 529 and will also earn 1.25% cashback. There is no annual fee.
Apply for Scholarships
Once your child is in high school, they can start applying for merit-based and need-based scholarships to offset the cost of tuition. Students can start searching for scholarships at any point in high school, but should especially focus during their junior and senior years.
Students can search on national databases like Scholly and FastWeb, but also try to find scholarships on their own. They can search for scholarships based on their particular interests, city or state and other personal details. For example, if they’re interested in computer programming, they can find computer programming-specific scholarships.
ETFs and index funds attempt to mimic the growth of the stock market. The general trend of the stock market in its few hundred years of existence has been upward, even if it has its daily ups and downs. So, the goal of a diversified portfolio, like those available in both ETFs and index funds, is to tap into that growth for individual consumers. Usually, these assets are geared toward slow and steady, long-term growth.
Before you start looking for your next investment opportunity, it’s smart to become more familiar with the different kinds of financial products available. This post will cover what you need to know about the difference betweenETFs, or exchange-traded funds, and index funds. The two investment tools are fairly similar, share many of the same perks, and are often suitable for similar long-term investing goals. However, they do differ in a few interesting ways. Some of the topics we’ll cover related to ETFs vs index funds include:
Before you call your broker, let’s cover the basics.
An ETF stands for exchange-traded fund. There’s a lot going on in that term, so let’s break it down. “Exchange-traded” means it’s traded on a stock exchange, the same way that investors might trade shares in an individual company. “Fund” simply means it’s a large collection of money that many people can add to. Put the two together, and you get a fund where investors can pool their money into a collection of stocks and bonds.
ETFs come in two broad categories that are important to know about before investing any capital: index ETFs and actively managed ETFs.
Indexed ETFs track a market index, like the Dow Jones or S&P 500. These are collections of large companies whose overall trajectory closely mirrors the progress of the market as a whole. Over history, the general trend of the economy has been upward. So, the idea behind an index-based ETF is to simply tap into that growth by putting the pooled funds into a collection of stocks that will track market trends.
Actively managed ETFs are managed by a fund manager who intentionally invests in certain securities in order to reach a specific investment goal. The idea behind an actively managed fund is that the investors, and the fund manager, are hoping to grow high-yielding assets faster than they might by simply matching a market index.
For the sake of this post, we are mostly concerned with the difference between index funds and ETFs, so we’ll focus more on index-based ETFs because they are much more common than their actively managed counterparts.
Index fund basics
Index funds are a general name for a fund that seeks to track a market index. So, technically speaking, an indexed ETF is a type of index fund. Index funds, however, can also be mutual funds, which are another investment product that you can purchase.
A mutual fund is a company that bundles investors’ money and puts it toward a set of securities and bonds with a particular investment goal in mind. Index mutual funds try to track a market index, and so they tend to grow with the economy over time. Other mutual funds may try to out-perform the market, or try to cash in on a new and exciting innovation that presents an investment opportunity.
Index funds, however, tend to be the “slow and steady wins the race” option. In fact, 80% of actively managed funds (funds that are attempting to out-perform the market) did worse over time than the S&P 500. This means that, if you had invested in an index fund tracking the S&P 500 instead, you would likely have made more money than someone who invested in an actively managed fund.
If it sounds a lot like an index-tracking ETF and an index-tracking mutual fund are pretty similar, don’t worry; that’s because they are. However. there are still a few important differences to point out, which we will go over next.
Index funds vs ETFs: What’s the difference?
The difference between an index-based ETF and an index-based mutual fund is pretty technical, but understanding investing often requires working through technical terms. First, in a certain sense, simply comparing ETFs vs index funds is a bit of a false dichotomy. That’s because ETFs can be index funds, as long as they’re structured to track an index.
In a broad sense, the two vehicles are geared toward the same purpose, too: earning you money slowly but (mostly) surely over the long term (years to decades). You’re likely to find both ETFs and indexed mutual funds included as part of retirement portfolios.
Both ETFs and mutual funds (indexed or not) are SEC-registered investment companies. ETFs, however, trade just like stocks meaning that you can buy or sell shares at any time the market is open. Mutual funds, on the other hand, can not be traded during the day. Mutual Funds are priced at the end of each trading day, so if you placed a buy trade for a mutual fund on Monday the shares would not be purchased until Tuesday. This main difference is because ETFs, like stocks, can only be purchased in whole shares. So if an ETF is priced at $25 per share and you had $80 to invest you could only buy 3 shares for $75 dollars. In a mutual fund you can buy decimals of shares. For example, if you still had $80 to invest and a share of a mutual fund was $25 then you could get 3.2 shares.
Mutual funds may have simpler, more hands-off reinvestment opportunities. That is, if you earn dividends, they may be immediately reinvested in your fund. ETFs, on the other hand, may charge a small fee for this transaction; however, you can also turn on automatic reinvestment of dividends for ETFs, as well.
Ultimately, choosing to invest in an ETF or Mutual fund will depend on your personal preference and the options you have based on where you are investing.
How do I know what’s right for me?
Once you’re ready to start investing, it’s normal to wonder what options are right for you, and for your specific situation. Your particular investment path will depend primarily on three key variables:
Your goals: What are you investing for? Are you saving for retirement, or are you planning a destination wedding or dream house?
Your time horizon: How long do you have to reach your goals?
Your risk tolerance: Are you okay with being a little risky in hope of a larger return, or would you rather play it safe and let slow and steady win the race?
Knowing what investment strategy is right given your answers to questions 1, 2, and 3 above is the first step in finding the portfolio that’s right for you. Whatever your specific situation, however, ETFs and index funds may be a solid choice.
Here are some of the benefits of investing through an ETF or index fund.
Long-term growth potential
As we noted above, the focus with index-based mutual funds and ETFs is to match the slow and steady growth of the market. While downturns do occur, and there may be periods where your investment portfolio is looking rougher than you’d like, chances are still good that you’ll be able to grow your investments in the long run.
In fact, the average historical growth of the S&P 500 is around 10% a year. That means, by investing in index funds that track that market index, you may be able to make similar gains — averaged over the long term.
Higher chance of long-term gains vs other assets
Take another look at the chart displayed above. It states that over 80% of actively managed funds under-performed the S&P 500. This suggests that, when investors try to be clever and invest in such a way that they beat the growth of the stock market, eight out of ten times, they fail to do so.
Again, if your aim is long-term growth, you may have a higher chance of achieving it by simply using an index-based ETF or index-based mutual fund to steadily grow your money, rather than risking it on an actively managed ETF or mutual fund that tries to out-perform the market.
Relatively low fees
Actively managed funds also tend to cost more. That’s because they require fund managers to actively research and pick out securities to invest in. Index funds (whether mutual funds or ETFs) avoid this by requiring little maintenance from fund managers. So, fees for investing tend to be lower.
ETF & index fund essentials: How to get started investing
Getting started investing can seem daunting, especially with so many options and technical terms floating around. Don’t worry; there are simple, concrete steps you can take to start taking advantage of ETFs and index funds. Consider these options:
Brokerage services: Brokerage services professionally manage your personal investment portfolio. They might help you plan for retirement, help you take advantage of tax breaks, or help you optimize investments for a specific goal. You can let them know you’re interested in investing in ETFs or through a mutual fund.
Robo investors: Rather than paying for an expensive human broker, a robo investor allows you to open a retirement account or personal investment portfolio with just a few taps of your phone. Cleverly programmed algorithms tailor an account to your preferences, including investing in ETFs and index funds.
Solo investing: You can choose to manage on your own and purchase a mutual fund directly from the company that runs it, or buy an ETF directly from a stock exchange. This might be a better option for those who know a bit about how to invest in stocks. (You may also want to take a look at our guide to investing mistakes to avoid before rushing to the exchanges.)
Retirement allocation: If you have an IRA that you’ve set up on your own, or you have a 401k through your employer, there’s a good chance you may already be invested in ETFs or an index-based mutual fund. If not, it’s a good idea to consider these options as part of your portfolio.
ETFs vs mutual funds vs index funds, and actively managed vs index-based — the terms can be tricky, but with the right background knowledge, you can make informed investment decisions to help grow your future.
July 10, 2018Posted By: growth-rapidly Tag: Investing
Would you like to invest your spare change? Then use Acorns. Acorns rounds up all of your debit and credit card purchases to the nearest dollar and invest the change.
1000 dollars may not seem a lot of money to some people, but it is a good chunk of money that can generate a good return and there are good investment options for your money. If you are wondering what is the best way to invest 1,000 dollars, then you have come to the right place. In this article, I will discuss how to invest 1000 dollars.
Important note:This article may contain affiliate links. Please see our disclosure policy.
How To Invest 1000 Dollars:
1. How to Invest 1000 Dollars: Invest in Index Funds.
When it comes to the types of investment you can make with 1000 dollars, there are plenty. But a good safe place to invest $1000 for some return is a no-load index fund. Investment companies like Vanguard has index funds which require a $1000 minimum to start. Plus, the fee is very low. So not only will your 1000 dollars has the potential to grow, it will also reduce just how much you’re paying for interest.
If you’d like to be a more hands-on investor and pick your own individual stocks as opposed to a mutual or index funds, you can easily do so with 1000 dollars. One best way to invest $1000 in stocks is to pick good quality dividend paying stocks/companies like Starbucks, Apple or Microsoft.
Buying stocks with 1000 dollars, however, will require a brokerage account. would recommend Ally Invest for $4.99. It’s important because in order to grow your wealth, you need to make sure you keep your trading fees as low as possible.
With 1000 dollars, you can easily pick 100 or more shares of good quality stocks and generate great return on your investment.
2. Start a Blog.
Using your $1000 to start a blog is a long term investment that can generate significant amount of passive income.
If you’re interested in starting a blog with some of your $1,000, I created a step-by-step guide that will help you start a blog of your own for cheap, starting at only $3.95 per month (this low price is only through my link) for blog hosting. In addition to this low price, you will receive a free blog domain (a $15 value through my Bluehost link if you purchase at least 12 months of blog hosting.
2. Invest in Yourself.
Without question, one of the best investments you can make is an investment in yourself. With 1000 dollars, you can buy online courses to learn any subject areas that may interest you. You can go to seminars or go to conferences about businesses. With 1000 dollars, you can buy several books about investing to have a great picture of all the options available to you. Investing 1000 dollars in yourself can actually generate greater long term returns.
3. Where to Invest 1000 Dollars: High Yield Savings Account.
If you want to earn some type of interest on your money with little to no risk, then putting your 1000 dollars into a high yield savings account is the way to go. High yield savings accounts offer anywhere from 0.9 % to 1.5 % interest rates than a traditional saving account or checking account would. Sometimes there is no minimum to open an account, and if there is, the minimum is usually around $100.
4. Certificate of Deposit.
You can open a CD account with 1000 dollars, and the return is much higher than that you’d receive from a high yield savings account. However, when you put money in a CD, you cannot take it out until it matures unless you’re willing to receive a penalty. There are six-month, 1 year to 6 year-terms CDs.
5. Pay Down Debt.
You may not think it that way, but the best return you can receive is by paying off your debt. Credit card tend to carry a higher interest rate than most forms of debts. The average interest rate from credit cards can range from 18 to 22%. If you can pay off your outstanding debt with your 1000 dollars, you can save a lot of money on the interest you would have paid.
Find Out: 7 Simple Steps to Get Out and Stay Out of Debt
If you don’t have any debt, then consider putting that money into your 401k plan or a Roth IRA. These retirement accounts can generate good returns on your money, because your earnings grow tax free.
6. How to Invest 1000 Dollars: Contribute to your Emergency Fund.
If you have already maxed out your IRA and your employer 401k account, I’d consider putting that 1000 dollars in an emergency fund. We’d suggest you have at least 3 to 6 months worth of monthly expenses in that fund.
Get Started: How To Save For An Emergency Fund
In conclusion, 1000 dollars is a good chunk of money. You just need to know how to use it to make your money work for you. Above are great ways to invest your money.
One way to get the best mortgage rates is to compare mortgage rates online. LendingTree is a great place to start. They offer a great comparison platform to give you the best mortgage rates.
Work with the Right Financial Advisor
You can talk to a financial advisor who can review your finances and help you save 100k (whether you need it to pay off debt, to invest, to buy a house, or plan for retirement, saving, etc). Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
In the past couple of years I’ve written about quite a few startups that are offering easy ways to save and invest.
As I was doing some research on several microsavings sites, companies that allow you to save and invest small amounts of money based on your spending or other triggers, I found Acorns.
Acorns is a company that allows you to invest your hard earned money in small micro “round-up transactions”, with the idea that over time your small investments of $0.50 cents here and $0.35 cents there, will lead to a much larger retirement account in the end.
Here’s a review of Acorns, and a look at how they can help you to pad your retirement bottom line.
Acorns was founded in 2012 by Jeff Cruttenden and his father Walter as a way for first time investors to invest in a diversified portfolio. After receiving all of the regulatory approvals, they launched the app on July 15, 2014, and have been helping new investors get in the market ever since. Here are the details from Wikipedia:
Acorns was founded by Jeff Cruttenden and his father, Walter Cruttenden in 2012. Walter was an investment banker and had previously founded and served as CEO of Roth Capital Partners and e-offering, an investment banking firm. Jeffrey with his father worked on creating a mobile app for first-time investors to invest small automated investments from a bank account into diversified portfolios.Within less than two years of launch, Acorns opened nearly 1 million investment accounts. Acorns Grow Inc. is the parent of Acorns Securities LLC, a member of FINRA and SIPC, and Acorns Advisers LLC, an SEC registered investment adviser.
Acorns has over 4.5 million customers and over $1.2 billion in assets under management as of early 2019. So they’re growing at a good clip, and look to continue that as an attractive option for newer or beginning investors.
How Does Acorns Work?
Acorns is a micro-saving and investing platform that is mainly accessed via a mobile phone app, and via their website. They have three main tools.
Acorns Invest, a taxable investment account.
Acorns Later, a retirement account.
Acorns Spend, a checking account and associated debit card that helps you to save more.
To get started you just sign up for an account, link your checking account and after verifying the account – you can start saving and investing money automatically, without any need for you to intervene.
3 Ways To Save & Invest
Once your account is all setup there are 3 different ways that you can save and invest.
Round-up savings: First, Acorns can save small amounts of money by rounding up your transactions in your main spending account. So if you spend $4.75 at McDonald’s, Acorns will round the transaction up to $5 and deposit $0.25 into your Acorns round-up balance. Once your round-up balance is at least $5, the money is withdrawn from your linked checking and added to your Acorns investment account.
Scheduled deposits: You can save recurring amounts to Acorns on a scheduled daily, weekly or monthly basis. Just set the deposit amount, choose the frequency, and forget it.
One time deposits: You can make one time lump sum deposits as well. So if you have $2000 you want to invest in Acorns, you can transfer that over whenever you want.
Acorns Investment Portfolios
The Acorns portfolios mainly invest in ETF index funds and were put together with the main input coming from Dr. Harry Markowitz, a Nobel Prize winner. He is commonly referred to as the father of modern portfolio theory.
Dr. Markowitz came on as a paid adviser in the early days of Acorns, and helped them to design good long term investing portfolios based on modern portfolio theory. They also take into account user input to questions in regards to net worth, yearly income, reasons for investing and time horizons – among other things.
When signing up there are 5 portfolios that you can choose from:
Conservative: 35% Stocks, 60% Bonds, 5% Real Estate
Moderately Conservative: 45% Stocks, 45% Bonds, 10% Real Estate
Moderate: 60% Stocks, 30% Bonds, 10% Real Estate
Moderately Aggressive:75% Stocks, 15% Bonds, 10% Real Estate
Aggressive: 90% Stocks, 0% Bonds, 10% Real Estate
As of 2019, the following low cost investments are in the portfolios:
Vanguard S&P 500 Index ETF (VOO)
Vanguard Small Cap Index ETF (VB)
Vanguard Emerging Markets FTSE Index ETF (VWO)
Vanguard FTSE Developed Markets ETF (VEA)
Vanguard REIT ETF (VNQ)
BlackRock iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD)
BlackRock iShares 1-3 Treasury Bond ETF (SHY)
The investments are mainly low cost Vanguard and IShares index fund ETFs, bond funds, and a real estate ETF to further diversify. The investments are meant to capture the market, and keep fees low, focusing on long term growth.
Investments can change over time, so check for current investments when you sign up.
Acorns Account Types
When you sign up for Acorns, there are three different account types that you can sign up for. We’ll take a brief look at them here.
Acorns Invest is the original micro-investing taxable investment account that Acorns launched with in 2014. It takes only 5 minutes to setup an account and start investing.
The account allows you to invest your spare change in a diversified portfolio. More than $1 billion has already been invested here. This account costs $1/month.
Acorns Later is Acorn’s retirement accounts. They’ll recommend an IRA account that fits your goals. That could be a traditional IRA, a Roth IRA or SEP IRA.
Once your IRA is setup and your portfolio is chosen, you can setup recurring contributions, and invest.
An Acorns Later + Acorns Invest account is $3/month.
The Acorns Spend account is a checking account with no account fees, reimbursed ATM fees and ways to earn cash bonuses that can be invested. You’ll also get an Acorns Visa debit card.
When you get an Acorns Spend account you’ll also get the Acorns Later + Acorns Invest accounts as well. All three together cost $5/month.
Opening An Account With Acorns
Opening an account with Acorns is simple, but it is currently only available for U.S. citizens over the age of 18.
To sign up just go through this simple process:
Go to Acorns.com via this link.
Enter an email address and password.
Connect your main spending account. (where they’ll track spending for round-up savings)
Connect your checking account (where deposits are funded from)
Create your investment account (taxable accounts only currently), including entering name, address, phone and birth date.
Enter your Social Security Number for ID verification, tax reporting and fraud prevention purposes.
Enter net worth, yearly income and your reason for investing. These are standard questions and will be used to help create your portfolio.
Choose your portfolio. Choose the recommendation or choose one of the other 4 portfolios mentioned above.
After you verify your accounts you’ll be set to start saving and investing money automatically by round-up savings, recurring deposits or one time deposits.
Other Features of Acorns
Acorns has added other features over the last couple of years.
The Found Money section on the Acorns app allows you to shop at Acorns partner sites like Jet.com, Blue Apron, Airbnb, Apple, Hulu and others to be rewarded with cash back when you use a linked payment method.
So for example, if you book with Airbnb via the Acorns app and use your linked card, they’ll invest up to 1.8% of your service fee in your Acorns account. Buy something from Apple via the app? You’ll get 1.2% back to invest.
It’s an interesting way to save and invest a little extra by doing things you might have done anyway. It’s not going to make a huge difference, but if you were going to buy something anyway it’s a nice bonus.
Grow Magazine – Educational Content
Acorns publishes an online personal finance magazine that is geared towards millennials with advice on side hustles, credit card debt, student loans, investing (obviously) and other financial topics.
The content also appears in the app, so it’s always at the tip of your fingers.
Acorns Service Fees And Minimums
Where the rubber meets the road is just how much you’ll be paying to use Acorns. What are the fees and minimums for using the service?
First of all, there are no minimums in order to have an account, and you only need $5 to invest in one of Acorn’s five pre-built portfolios. So the service is accessible to just about everyone. There are no trading fees either.
Free For Students
If you’re a student who registers for the service with a .edu email address, you’ll be eligible to receive up to 4 years of free service with Acorns.
Since young first time investors are their target market, that makes some sense. If you’re a student, why wouldn’t you jump in on a great deal like this?
Low Monthly Management Fees
For non-students, you’ll pay $1/month when you start investing with Acorns Invest. When your account balance is over $5000, you’ll pay a 0.25% annual management fee, There used to be a 0.25% annual management fee for accounts over $5,000, but as of 2018 all accounts now pay $1/month for Acorns Invest product.
If you add on Acorns Later retirement accounts, or Later + Spend checking account it will be $3/month or $5/month respectively.
Acorns Lite: $1/month.
Acorns Personal: $3/month.
Acorns Family: $5/month.
The pricing is simple and easy to understand. No surprises. You just pay $1, $3, or $5.
Automated Micro-Saving & Investing
I’m a big fan of all the automated saving and investing services that have popped up in the past few years. My belief is that the more automatic you can make saving investing, the more likely most people are to plan for their future and put their future first.
I love the fact that Acorns invests for the long term with an investing strategy based on Modern Portfolio theory. If you’re a student, it’s a no brainer to sign up since you can get up to 4 years of the service for free.
For others, the fees charged for the service are in line with similar robo-advisors. The only caveats to my hearty recommendation are the facts that there may be cheaper options for those with extremely low account balances. The faster your balance grows, the less of an issue that becomes.
I’d also love to see them add some retirement account options in the future as they currently only provide taxable accounts.
All in all Acorns is a great service that can help make investing easier – and more automatic. They’re one of the best microsavings and investing sites out there, and I’d recommend checking it out.
I’m having trouble convincing my husband that we should start making investments. He thinks the stock market is a scam, but I’ve had several college classes that discussed Wall Street and several of my friends are doing OK with their portfolios.
It was a struggle to even convince him to move from a traditional savings account to a high-yielding one. I would never bet with money we could not afford. How do I convince my husband that building wealth is a risk but a worthy one?
Some people don’t invest because they truly are risk-averse. They lose sleep when the stock market has a bad day, let alone when it has a complete meltdown like the one we saw last March. Your husband could fall into this camp, particularly if he’s ever seen someone close to him lose money on a bad investment.
Sometimes it’s sheer laziness. That possibility crossed my mind for your husband. Not wanting to switch to a high-yield savings account seems less about risk and more about the fact that switching bank accounts is a pain.
Often, though, it boils down to this: We’d rather spend our money now instead of decades from now. It sounds like you’re relatively young — and when you’re young and your paychecks are stretched thin, it feels like you have all the time in the world. Investing takes a lot of discipline. So dismissing the entire stock market as a scam can be a convenient excuse for spending all of your money now.
Which do you think best describes your husband? If it’s the first scenario, he needs to understand that the bigger risk is not investing.
Suppose your goal is to retire with $500,000. You could save $1,000 a month for 40 years straight and still not get there. Your money would also be worth way less than $500,000 by that point due to inflation. But by earning average stock market returns of 8%, you could get to $500,000 by investing less than $200 a month for 40 years.
If laziness is the issue, that’s easy. You can budget an amount to automatically transfer and let a robo-adviser invest it for you based on your age, when you want to retire and how much risk you’re willing to take. Pretty much any major brokerage offers robo-investing. You don’t need to actively manage a portfolio.
If your husband is the type who wants to spend every cent today, that’s a bigger challenge. I think you’ll have the best chance of success if you and your husband can get on the same page about your long-term goals.
At the very least, does he acknowledge that he wants to retire someday? If so, does he have any ideas about how he plans to get there without investing?
You could suggest starting small with $50 or $100 a month. Perhaps if you can identify something that would be relatively painless for both of you to cut, you can start there and invest that money instead.
You’d be hard-pressed to find a wealthy person who isn’t invested in the stock market. Yet on some level, I get your husband’s skepticism.
I’m not going to tell you that the financial system is perfect. Of course, there will always be scams. But there are plenty of regulatory agencies protecting investors, including the SEC, which regulates the market, and FINRA, which sets the rules for brokerages. You can avoid scams even further by investing across the stock market using an index fund instead of just a handful of companies. Avoiding dirt-cheap penny stocks will also help you avoid being scammed.
Consistently putting money into an S&P 500 index fund is the most proven way to build wealth over time. If you’d invested at any point in the index’s history and kept your money invested for 20 years, you’d have earned a profit every time.
I’m hoping that your husband’s resistance stems from the fact that he’s unfamiliar with investing. Maybe he’ll come around once he sees your money isn’t vanishing into a slot machine each month.
What I don’t want is for you to shoulder the burden for managing your money alone, and I get the sense that may be happening. At a minimum, the two of you should sit down to review your finances once a month. You can go over your spending and talk about your bigger goals. If he still doesn’t want to invest, press him on it: How exactly does he plan to build a nest egg?
Don’t let him off the hook here. He doesn’t get to put your future at risk over his hard-headed beliefs.
Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to [email protected].
If money pours like water through your fingertips, the right financial adviser can be a godsend. An expert can help plug the leaky holes in your budget, transforming you into someone who is thriving instead of scraping by.
But many folks — workers and retirees alike — find there are times when a DIY approach to savings and investing is all they require.
Following are a few situations where relying on your own financial wits is just as likely to produce the right answers as paying a professional to help with the task.
Your retirement income flows mostly from a pension
If you have a pension, consider yourself among the lucky few. Just 16% of private-sector workers participate in a pension plan, down from 35% in the early 1990s, according to government statistics.
Retirees with a pension typically can choose to have their benefit paid in one of two ways:
Take a pension annuity and get the benefit in the form of a monthly check.
Take a lump-sum distribution, in which the money is paid out all at once.
If you choose option No. 1, you can basically set it and forget it. Your money will simply roll in on a regular basis, much like a Social Security benefit. A financial pro can still help you decide how to budget or invest that pension money, but many people won’t require this type of assistance.
On the other hand, option No. 2 may demand more thought. Once you receive the lump sum of money, you need to manage it in a way that serves you well over the course of a long retirement. In this case, you might want to talk to a financial adviser if you don’t feel comfortable making such decisions on your own.
You choose index funds when investing
“Market timers” listen to their hunches and dip into and out of the stock market based on these whims.
Think twice before you join them.
Trying to guess for yourself where the market is going — or listening to the predictions of investing “sages,” including know-it-all financial advisers — is a fool’s errand, as numerous studies have shown.
A simpler — and likely more successful — approach is to park your money in a plain-vanilla stock index fund. These mutual funds give you access to a wide range of companies and spread out your risk. History has shown index funds to be a no-fuss, no-muss way to get rich over the long haul.
You can learn more about them in “9 Tips for Sane and Successful Stock Investing.”
You build retirement savings through a target-date fund
Another investing option is to consider a target-date fund, which tries to match your investment asset allocation with your projected retirement date.
These funds are designed to keep your investment mix tilted toward risk when you are young, before gradually dialing down that level of risk as your golden years approach.
By their very nature, target-date funds allow you to put your investing on autopilot. You simply purchase shares of the mutual fund and let your money ride as the asset allocation automatically adjusts over the years. No adviser is necessary.
To learn more, check out “5 Questions to Ask When Picking a Target-Date Fund.”
You commit to dollar-cost averaging
Dollar-cost averaging is probably the simplest way to invest. You commit to regularly investing a given amount of money on a scheduled basis, and then let the market work its magic.
For example, say you plan to invest $10,000 annually in the stock market over the next decade. You then break that yearly $10,000 down into 12 equal amounts — $833.33 — and invest that amount on the first day of every month, come heck or high water.
In a nutshell, that is dollar-cost averaging. If the market is high on the first of the month, you invest $833.33. If it’s low, you do the same. And you repeat that investment every month over the 10-year period.
Clearly, you do not need anyone — even a financial adviser — to help with this. In fact, you can arrange for your mutual fund provider to withdraw this money directly from a savings account each month. That way, you literally do not have to think about the process again for the next decade.
Should you use a financial adviser after all?
Now, just because you can skip using a financial adviser doesn’t necessarily mean you should. Yes, some folks can do these things on their own. But others can benefit from tapping into the wisdom of a financial pro.
For example, let’s say you commit to dollar-cost averaging. For a couple of years, your investments soar and all is well.
Then, the stock market suddenly tanks. Will you still have the courage to put your money on the line if stocks steadily decline for months — or even years, as they did in the early 2000s?
A good financial adviser can talk you off the financial ledge and remind you of why you committed to that strategy in the first place — and how it is likely to pay off in the long run.
That is just one of the ways a financial pro can be worth the money you spend on him or her. So, if professional help sounds like the right choice for you, stop by our Solutions Center and find a great financial adviser.
Or, consider enrolling in our online course Money Made Simple.
This course features lessons on 13 key financial topics. You’ll learn using short, easy-to-watch videos, as well as jargon-free articles and worksheets. The chapters cover everything you need to know about:
Setting and achieving goals
Organizing your finances
Living more while spending less
Buying and owning cars
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