via visualcapitalist:
Weeks ago, we posted an infographic that provided an easy introduction to investing, and why it should be a priority.
But how does one actually get into the market?
Today’s infographic is a practical guide that explains and compares four different ways to get started:
Investing can seem confusing for a newcomer, and there are many conflicting messages out there that can add to this perceived complexity.
However, when you boil it all down, there are only four real ways to get into the market.
THE INVESTMENT CONTINUUM
Investing can be a full-time job, or it can be something that you set and forget – it all depends on how you do it.
Picking stocks:
Manually building your own portfolio of stocks and other securities. This provides the ultimate level of control – but it’s also extremely challenging to do successfully. Managing your own money through market fluctuations can be a humbling experience.
Picking managers:
The next step up the continuum is to pick the professionals that manage investment portfolios called mutual funds. Buying a mutual fund ensures your money is professional managed, but you still have to make sure you have the appropriate asset allocations, and watch fees closely.
Picking index funds:
Another option is to invest in the stock market as a whole, which has shown exponential returns over time. An index fund is one way to approach this – it buys all the stocks in the market, and tries to replicate the performance of the index as a whole. The downsides: lack of control, and less downside protection.
Hiring a financial planner:
Finally, hiring a financial planner allows you to build a personalized relationship over time. They will manage the investments on your behalf and answer any questions, but will charge you fees to do so. It’s also important to remember that if you go this route, that not all financial advisors are created equal.
Which of these four options is best – there is no correct answer that applies to everyone. It all depends on your experience, mindset, tendencies, and personality.