How to invest for the first time and save for retirement

On the Money is a new monthly advice column written by Nicole Decker, A personal financing An expert who has been writing about money for over a decade. For Vox’s Money Talks interview column, I wrote stories about couples on the run Small tradeMobility Different relationships with spendinghandle health insurance, and more. If you want advice on spending, saving, or investing—or any of the complex feelings that may arise as you prepare to make big financial decisions—you can Submit your question here. Here, we answer two questions asked by Vox readers, edited and condensed.

How do ordinary people invest in Stock market? I tried a day trading app, but the whole experience felt like a gamble. I also opened an e-commerce account, but I was paralyzed by the amount of data you gave me and I was too intimidated to use it. Is there a “set it and forget it” way to invest a portion of your monthly income without having to manage a portfolio?

There is, in fact, a “set it and forget it” way to invest your money.

It’s called a target date index fund.

These funds were created specifically to deal with risk management involved in long-term investing. Let’s say you plan to retire after 30 years. Any money you put into a target-date fund this year will likely be allocated toward higher-risk, higher-reward investments — FAANG stocks, for example — but as your retirement date approaches, the target-date fund will automatically rebalance your portfolio so that more of your money becomes available. Stocks and bonds with lower risk and lower returns.

Some people argue that target-date index funds are too expensive for the value they provide. This has to do with something called expense ratios, which I won’t get into now because you seem to be the type to want to deal with as few numbers as possible. Instead, I will tell you that people who want to “set it and forget it” but don’t want to pay the higher fees associated with target date funds often choose total stock market index funds instead. These funds match the performance of the entire stock market, and if you’re the type who believes that – despite occasional periods of volatility – the market will continue to trend upwards over time, then a total stock market fund may be your best bet.

Now that I’ve answered your questions about how to invest without managing a portfolio, I want to come back to your first question. The truth is that many ordinary people do not invest in the stock market. Just under 40 percent of American adults have never invested any of their money, according to May Gallup poll – which means you can live a completely normal life without buying a stock or bond.

The real question is whether this is the kind of life you want to live. You are fortunate to be in a position to have additional financial resources, which is often associated with the decision to invest in the stock market – but it does not have to. You can read the entire Gallup Poll if you want to understand the relationship between income and investment, but you don’t really need a survey to tell you that the more money you earn, the more likely you are to invest a percentage of your money. However, many people have the money to invest and still choose not to.

What do they do instead?

Read on.

Are there other ways to save for retirement besides investing in stocks and bonds, or am I beholden to the black box that is Wall Street?

I’m glad you asked.

There are many, many ways to save for retirement, especially once you get over the idea that your retirement money should be stored in a tax-advantaged savings vehicle like an IRA or 401(k).

If you’re fully committed to the entire retirement account thing — IRAs, 401(k)s, SEPs, Simples, Roths — you can always put money into those accounts. without investing in stocks and bonds. Some brokerages automatically store your retirement contributions in a money market account, which is technically an investment and can lose value, but other brokerages are starting to allow you to put your contributions into high-yield savings accounts or CDs. All of these options earn interest and allow you to take advantage of long-term compound growth.

Putting your money into an IRA or 401(k) without investing it It can be a smart move for people worried about Wall Street but still interested in getting tax breaks as a freelancer or making the most of a corporate match. It’s also a good move for people who need some way to secure their money until retirement. If you know you won’t be able to resist the temptation to spend every penny you earn, putting those extra pennies into a tax-advantaged retirement account—after setting aside enough cash for an emergency fund, of course—is one way to solve the problem. Since these types of accounts have taxes and penalties for most types of early withdrawals — with a few exceptions, of course (and a few more if you have a Roth IRA) — storing your money in a tax-advantaged retirement account can motivate you to keep it there until you retire.

But IRAs and 401(k)s aren’t the only way to save for retirement. You can also invest in your career. A portion of your retirement fund could be spent on transforming yourself into the type of employee or freelancer whose name is at the top of every employment listing — which can lead to earnings growth that outperforms even the best stock market returns.

Other people may want to take some of the money they would have saved for retirement and put it into debt. If you’re paying more in monthly interest charges than you’re earning on your investments, for example, it might be time to temporarily reprioritise.

You may also want to allocate a portion of your retirement fund toward real estate, especially if you are in a position to purchase your forever home. If you can pay off your mortgage as quickly as possible, you’ll have more money left over each month, helping you maintain financial security and avoid debt — and if you combine stable housing with a frugal, debt-free lifestyle and the flexibility of a recession-proof career plan, you might. Be in a position to achieve financial independence.

Not many of us will make it that far, but that doesn’t mean our only other option is to put all of our money into the stock market. You can choose where to invest – in your career, in your relationships, in your neighborhood, or in the long-term potential of the global economy.

Sixty-one percent of American adults, according to Gallup, bet on Wall Street.

good luck.