5 Things You Should Know Before You Invest

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Maybe it’s just us, but for most of our lives, investing sounded like one of those old, dusty words only used by seasoned finance execs while eating a hefty steak dinner with their fraternity brothers. Well, folks, today is a new day.

Regardless of whether you think you’ll ever invest, it’s important to know a few things before you start. Ariel Anderson Fortunato, a certified financial planner at Society of Grownups, shared with Swirled the following five major pieces of advice everyone needs to hear before diving into their first investment (or before running for the hills and away from investments altogether).

1. Investing is not just for the elite.

If we could scream it from the mountaintop, we would. You don’t need to be a millionaire or a financial adviser to know how to invest. Even crazier: You may already be investing without realizing it.

“Most people are already investing in their 401(k) and usually don’t realize that’s an investment,” said Fortunato. “Just stating that could take some of the fear out of it.”

Aside from learning some basic investing terms, there are three ways to actually get started with investing. The first, according to Fortunato, is the “do-it-yourself” approach, which is the most hands-on strategy. You’ll need to know a bit more about investing before jumping into it solo. The second option is to hire a certified investment advisor, which Fortunato said is the more expensive option but mostly hands-free. The third option Fortunato recommends is a combo of the first two: a digital solution that allows you to learn about investing while having guidance from an online tool. Some good examples are Betterment, WealthFront, Acorns and Aspiration. This strategy “takes the guesswork out of investing and it’s cost-effective.”

2. Investing always comes with risk.

Though anyone can invest, it’s not without a little gamble.

“You can determine how much risk you’re comfortable with and select investment choices that match that,” said Fortunato. “Stocks are riskier than bonds, for example.”

It’s important to know that you have lots of options, and Fortunato suggests investing in multiple industries and geographies to diversify your mix of investments.

“By owning different things, you reduce the overall risk of your investment,” she said. “You’re hoping that if one investment tanks, you can make up for those losses. It’s about not putting all your eggs in one basket. And ultimately, there’s no guaranteed investment.”

3. The most important factor in determining whether you should invest is not how much money you have.


You would think that you’d have to save a certain amount to start investing, but Fortunato said that’s not always true. Your financial goals and the time horizon for your goals (the amount of time you plan to save until the event you’re saving for) are paramount when it comes to investing.

“Short-term goals like an emergency fund should be left in low-risk vehicles like cash or savings account,” she said. “Longer-term goals like retirement or maybe a child’s college fund are more suitable for investing. The idea is that as markets move up and down over time, if you can stay in the game, you can recover from those market dips.” It’s also important to note that investments look totally different from goal to goal and from timeline to timeline. “Your retirement might be structured very differently from your child’s college fund,” said Fortunato.

4. There are tax ramifications to investing.

Whether you strike it big or break even from year to year, you’ll be answering to the IRS for all of your activity. You may owe tax depending on a multitude of factors, like the kind of accounts you hold, if these accounts paid any interest, how they performed on an annual basis and whether you sold your position.

“The important thing to know is that if you have a taxable investment account — not an IRA or 401(k) — you want to make sure you gather any year-end tax stuff before you file,” said Fortunato. “Sometimes these forms aren’t available until March, so it could actually cause you to refile if you’re one of those people who file early every year.”

5. Funds are your friend.

And by funds, we mean mutual funds. Don’t worry — they sound super complicated, but they could be your best friends when it comes to starting investing.

“They’re actually a great tool for investors who have a limited knowledge or limited time,” said Fortunato. A mutual fund, which is an investment strategy that allows you and other investors to pool funds that all go toward a collection of stocks, bonds or other forms of investment, allows you to go in on an investment when you don’t have the money to do it solo or when you want to diversify your investments.

Honestly, investing can be just as hip and relevant to you as your favorite budgeting app. And if we can figure it out, you can, too. We believe in you!