Investing For Beginners

Beginner investing mode

We get it. Investing can be confusing and overwhelming if you’re new. That’s why the Dream Forward 401(k) has an easy-to-use "Automatic" investing mode. You don’t have to pick through a list of dozens of different investment options.

Automatic mode uses what’s called a target date fund. Think of it as all-in-one. The target date fund is made up of a diversified mix (more on what that means below!) of investments that automatically adjusts as you approach your target retirement age (hence the name “target date”).

What does diversification mean?

Think of it as a “don’t put all of your eggs in one basket” mentality for investing!

There are different types of investments, called asset classes. Investing in an oil company would fall under the “commodities” asset class. Buying U.S. government bonds is under the “fixed income” asset class. Buying property falls under the real estate asset class, etc.

Each year, some types of investments will perform better than others, so the best way to make money is to invest in a broad mix of different asset classes. And that’s exactly what the target date fund does for you!

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The value of time

The value of time is another key principle for new investors. Here’s an example. Sarah put $10,000 in the S&P 500 (a group of 500 of the largest companies in America) 30 years ago. Joe put $50,000 into the S&P 500 10 years ago. Which person do you think ends up with more money?

The answer is Sarah. Sarah made $25,000 more than Joe even though Sarah invested much less money. It takes years for investments to grow and become more valuable! The sooner you start, the better.

Worried about losing money?

Watching the stock market’s ups and downs can be scary. If you’re nervous about losing money or doing the wrong thing, check out our Worried About The Stock Market page.

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