Getting Started: A Foundation For New Investors, Part 3

Last month, we addressed some of the most common concerns for those looking to begin investing. In our third and final part of this series, we’ll address a few more specific and, perhaps, more complex concerns of new investors.

So, you’ve decided to start investing. You’ve determined how much you can save each month, decided where to save (401k, 403b, IRA, taxable account, etc.), opened your new accounts, and chose what to funds to invest in. In fact, for this scenario, let’s assume you’ve already had a few months of steady investing. What happens next?

Here are a few common questions:

What happens when I file my taxes?

For your investments held within an account with your employer—i.e., 401(k)—your annual contributions are included on your W2 IRS form. For accounts not associated with your emploter—i.e., IRA or taxable account—your custodian will provide separate annual tax forms. When filing your taxes, simply use these forms to show how much you contributed or received regarding your investments.

Should I ever change my investments?

Yes, but only when necessary. Remember, you’re in this for the long-haul, especially if you’re investing within a qualified plan such as a 401(k) or IRA. The short-term volatility of markets should rarely affect your investments within a retirement plan. You might change investments more frequently with taxable investment accounts, but it should not be a common practice. In both instances, steady long-term investing is usually the wisest strategy

Should I ever change the amount I am investing?

Yes, but, again, only when necessary. If you can save and invest more, then do it. Check every few months to ensure you invest as much as possible. Conversely, if monthly bills aren’t being paid, stop the investing, and take care of the bills first. You can return to investing later. But once you’re back in good shape, don’t forget to restart your investing.

Is it helpful to acquire more knowledge about investing?

Absolutely, but with a caveat. Learning more about the markets can sometimes be the catalyst for bad decisions. Does this sound counterintuitive? Well, at times, when new investors learn more and more about financial markets, they abandon their long-term investment strategy in favor of more complex and riskier strategies. In other words, they get overconfident in their abilities.

To sum up this three-part series in one sentence, it is this: Investing is absolutely necessary for financial security yet much easier than you think. The prospect of investing spooks far too many smart, hardworking people, and we hope this series has calmed those fears.

Multnomah Group is a registered investment adviser, registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Multnomah Group does not provide legal or tax advice.

Comment On This Article