First-Time Investing: Where to Invest Your First Paycheck

Jake Michaels
November 20, 2020
1:00 am

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investment concept

Although investing has only been accessible for the ‘rich’ a couple of years ago, the barrier to that entry is non-existing today, thanks to various companies and services aiming to make investment available for everyone. It gives you ample opportunities to get the best out of your first paycheck and grow your wealth.

Here are five investment options that are ideal for your first paycheck.

Robo-Advisors

If you have no idea about investing and its concept, getting Robo-advisors is an excellent choice. It can manage your investments by using computer algorithms, and thanks to its low overhead, they have significantly lower fees than human investment managers. You can open a Robo-advisor account for free, making it an excellent start for investing your first paycheck as it requires little money and does most of the work.

So, if you’re in the ‘current’ development of a job portal website or attending to your friend’s birthday, Robo-advisors can streamline the investment process for you — allowing you to focus on vital tasks at hand.

Retirement Plans

If your employer or company is offering retirement plans like 401(k), it’s best to place your paycheck in these options, especially if your organization matches a portion of your contribution. This situation gives you a high guaranteed return on investment (ROI). There isn’t a minimum, so you can start at as little as 1% for each paycheck and expand from there.

Target-date Mutual Funds

Target-date mutual funds are a “basket of investments,” where you can buy a share in the fund and, in doing so, invest in all the fund’s holdings in a single transaction. It typically holds a combination of stocks and bonds. If you’re planning to retire in 30 years, choose a target-date fund in 2050 in the name, having mostly stocks since your preferred date is far away. This long period accumulates a more considerable return long-term.

Index Funds

Index funds act like automated mutual funds — where rather than employing a professional manager to create and maintain your portfolio of investments, it tracks a market index, a selection of assets representing a portion of the market. Because index funds take a passive investment approach by tracking market indexes rather than traditional portfolio management, they typically have lower expense ratios, making it more profitable.

Real Estate

real estate example

You don’t need millions or good credit to invest in real estate today, thanks to a new investment category known as “real estate crowdfunding.” This strategy allows you to own fractional shares of massive commercial properties without the expensive costs and headaches of being a landlord. However, they can be a risky investment since you’ll be placing an entire amount into one property rather than a diverse portfolio of individual assets.

When getting your first paycheck, you may get tempted to treat yourself to something nice, and you definitely should. However, it’s wise not to waste all of it and allocate some of your money in a way that pays you dividends over time. Investing in any of the options mentioned helps you become one step closer to optimal financial health — giving you the most out of your first paycheck.

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