Financial Literacy

Expert Advice: Saving and Investing

BY Nate White | Portfolio Analyst and Senior Project Manager | Jan 5, 2022

At Spectrum, we are passionate about financial literacy and ensuring information is available for all.  Recently, our Investment Analyst and Senior Project Manager, Nate White, gave his expert insights to

Even if you’re not living paycheck-to-paycheck, sometimes it’s good to revisit the basics of personal finance.  Below, Nate discusses how Saving and Investing can help you accumulate wealth over time and offers helpful tips on how to get started.

What advice can you give people who are living paycheck to paycheck and want to start investing?

Saving and investing are two related topics that come up frequently in most people’s lives. The distinction between the two is usually based on the time horizon. Typically, saving is for upcoming spending or unforeseen expenses in the next 12 months. Investing is a long-term commitment of money that is not for near-term consumption. There is never a wrong time to start saving. Typical advice for savings is to have a minimum of six months of expenses held in cash.

Not everyone thinks that they can start saving or investing, but nowadays, there are many ways to do both. Most custodians offer fractional shares, which means that you can buy less than a total share of a fund, making investing five or ten dollars feasible. There is no excuse not to invest.

When it comes to starting to invest, there will never be a perfect time to begin. Immediately is the answer but with a caveat. You shouldn’t invest any funds that might be needed in the next year because there is always the risk of losing money. Stock markets are constantly moving, which can be intimidating. To sidestep the timing issue, use a method like dollar-cost averaging or periodic investment plans to invest into a desired investment over a predefined amount of time. Frequently people will establish automatic plans, so it takes the decision fatigue out of the equation. Knowing when, into what, and how frequently you invest removes some of the uncertainty of investing.

Investing is all about compound returns, which, in plain English, means that your money makes money. Then that money makes more money and so forth. The sooner you start saving, the sooner you start compounding. The first key to investing is finding the bare minimum that you can commit to putting to work each paycheck. Then, it’s best to have a plan for what you will do when markets turn down. You shouldn’t panic. Instead, you should prepare. Historically the stock market pulls back at frequent intervals, but no one knows when that will be. If the thought of your accounts drastically fluctuating makes you nervous, you should lean on a more conservative portfolio.

When you are starting, you should make things as easy as possible for yourself. This means a simple allocation made up of mutual funds or ETFs that follow a broad index. An excellent example of a broad index is the S&P 500. Index funds are good because they will add and subtract companies without the individual investor having to make a decision. Not only are index funds low-cost (expense ratio, tax efficiency, etc.), they are relatively easy to use to build a diversified portfolio. You can use a handful of funds to have a broad and diverse portfolio.

The most important thing you can do as an investor is to be informed and knowledgeable about all aspects of the process. Planning and preparation can go a very long way. Know what your goals are and how you will achieve them. There are several periods in your life when you should increase your investment contributions, whether that is in an IRA or a personal investment account. You should save some, invest some and spend some whenever you have an unexpected windfall (inheritance, lottery, etc.). Another excellent opportunity to increase your investment contributions is when you start a new, higher-paying job or get an unexpected bonus. One place you might not think about is if a foreseeable future event creates anxiety like retirement, a child’s college plans, or a wedding.

Interested in learning more?  Read the full article.

This article and aforementioned content have been provided by with credit to Geoff Williams.

Spectrum Wealth Management, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. Additional information about Spectrum’s investment advisory services is found in Form ADV Part 2, which is available upon request. The information presented is for educational and illustrative purposes only and does not constitute tax, legal, or investment advice. Tax and legal counsel should be engaged before taking any action. The opinions expressed and material provided are for general information and should not be considered a solicitation for purchasing or selling any security.