6 Real Questions About Investing—Answered

When should you start investing? How much do you need to start? And what type of investments are right for you?

If you’re curious about investing, but you haven’t yet dipped your toes in the water, you’re not alone. In fact, this was a hot topic among SoFi members in a recent discussion with wealth advisors on Facebook. (That’s right, SoFi members have daily access to complimentary advisors—learn more here.)

Even if you’re not a member, we’ve brought the most pressing investing questions—and more importantly, their answers, courtesy of SoFi Financial Advisor Katy Song—right here. Read on to learn more.

When, how, and how much do you need to start investing?

You can open an investment account for free with many financial service providers. If you are a SoFi member, you can open a Wealth Account with no SoFi fees. While sometimes there can be a minimum to open an account, like $500, you can start with very small amounts.

Starting to invest early in life takes advantage of the power of compounding. So, the sooner the better, as long as you have a cash cushion saved in an emergency fund and are doing no brainers like maxing out your 401(k) if you have one. (The maximum contribution is $18,000 per year.) Consider getting there if you aren’t already!

I am going to have $30 left in my bank account before my monthly salary hits. What is the lowest possible entry threshold that isn’t a waste of resources?

Again, before you start investing, you should have an emergency fund (we recommend three to six months of expenses). Most of this money should be in something safe and easy to withdraw, like an FDIC-insured savings account. Once you have that in place, you can begin by investing enough in your 401(k) to get any matching contributions your employer offers. It’s important to start investing, but the first step is that emergency fund.

I have $10k burning a hole in my pocket. Should I buy Apple stock or Netflix stock with it?

Individual stock picking opens you up to business-specific risk. We recommend starting with a well-diversified portfolio of index funds or ETFs. Once you’ve got that established, it’s okay to put some of your assets (2-3%) in an individual stock you are passionate about. Also, rather than either stock, you can consider a well-diversified tech or Nasdaq ETF; for example, Powershares QQQ or ONEQ. Both ETFs have both Apple and Netflix and are less risky than buying either one.

For the newbie investor, do you recommend ETFs or mutual funds?

ETFs and index mutual funds are very similar. ETFs trade throughout the day and are usually more tax efficient than mutual funds. If you are investing in a regular taxable brokerage account, consider ETFs.

I have already maxed out my employer match. Right now I’m investing about $10K into my 401K after match. I want to put more into my 401K but I don’t like target retirement funds. The company that does low cost index funds in my 401K is a small company that I don’t trust to optimize returns. Would you recommend me opening a traditional IRA with Vanguard or stick with a 401k? I’m getting taxed hard…

Is the target date fund publicly traded with a ticker symbol? There are some good target date funds out there. Does your company offer any individual mutual fund investment options? As an active participant in your 401K, your ability to contribute to a tax-deductible IRA depends on your income level.

If you’re single and make over $72,000, or married and make over $119,000, an IRA contribution won’t be deductible. Either way, you can contribute more to a 401(k) ($18,000) than to an IRA ($5500). Maxing out your 401(k) can be one of the best ways to reduce your taxable income, and thus your taxes. It’s also important to realize where you stand with your retirement goals. Use this retirement calculator to see if you are on track.

Do you offer consulting services to individuals who have Sofi Wealth accounts?

Yes, we do! Call us for a free consultation with an advisor at 855-525-7634 (SOFI).

Have questions of your own? If you’re a SoFi member, join us in the members-only Facebook group next #WealthWednesday for another live discussion. If you’re not, call 855-525-7634 for a free appointment with a SoFi Financial Advisor to get personalized advice on how to start investing.

SoFi Wealth, LLC does not render tax or legal advice. Individual circumstances are unique and we recommend that you consult with a qualified tax advisor for your specific needs.

ABOUT SoFi SoFi is challenging the status quo with an entirely new approach to consumer finance. We believe that by providing our members with innovative products and unprecedented services, we can help propel them to new levels of financial greatness. We’re here to help accelerate your success.

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