Today’s graduates are presently faced with a wide range of different challenges, including investments. From landing the perfect job in the best company in their field to quitting part-time gigs to secure full-time employment, their lives, as an adult, usually changes dramatically. And of course, one of the most beneficial things that these recent grads can do for themselves is devise a solid investment plan to support their future goals and objectives. A huge part of this plan is finding the right types of investment opportunities. Therefore, it is important for these recent grads to do their research before they jump right in.
So, here are 3 of the top smart investments that’s highly recommended for today’s recent graduates.
1. Contribute to a Roth IRA
As mentioned above, before these graduates begin their investments, it is important that they become familiar with investing in the stock market and investment opportunities like the Roth IRA. While the 401 (K) retirement plans are often viable options, the investor is limited in options that they can exercise. Simply put, the choices of investment options are presently confined to single company investments and/or EFTs (Exchange Traded Fund).
On the other hand, if you invest your money in a Roth IRA, you can take advantage of a wide range of great benefits, including the following:
- Major Tax Advantages
- Tax – Free Withdrawals during retirement
- Earnings grow and compound without taxation
- Thousands of dollars in savings
It is also important to note that the earlier you invest in Roth IRA instruments the better. This is because there is a cap on how much can be made in capital gains. And, there are certain limits on income so grads need to start early to get the full benefits over time. The primary goals with a Roth IRA is to build up a profitable portfolio over an extended period of time.
2. Start acquiring dividend-paying stocks
With inflation at an all time high, recent grads should also pay careful attention to investment instruments that they place their earnings into. Because some sources of investment income are undervalued, they may not be looked upon as viable options for the future. However, whenever people look clearly at what types of stocks perform the best, they may want to consider dividend paying stocks as worthy investment opportunities.
You should also know that the timing of making these investments is critical to your overall success. For instance, when recent grads start early instead of waiting significant periods of time, they can take advantage of the compound interests that add up greatly over time. In essence, the earlier a recent graduate starts with their investments, the better it will be for them to increase their wealth and financial standing as a whole.
3. Enroll in DRIP (Dividend Reinvestment Program)
In addition to investing in dividend-paying stocks, recent grads should also consider enrolling in DRIP (Dividend Reinvestment Programs). This program is designed to help investors increase their earning potential in a number of ways, including using the dividends that the investor has already received to automatically re-invest. The type of investments that’s used in this program involves purchasing more shares in the same companies. To find out more about DRIP (Dividend Reinvestment Program), you should visit sites like bankrate.com.
4. Use dollar-cost averaging
Recent grads are usually new to saving large sums of money, especially since most of the money that they make goes to tution, books, lab fees and other college expenses. So, it is not surprising that making investments into stock and other financial instruments is also a new venture and experience.
Thankfully, there are many different investment platforms available online to make their choices from. More importantly, there are relatively safe investment platforms that help to minimize the risks. For instance, if recent grads decide to invest their money in Use dollar-cost averaging, they can easily sign up. And once they begin this type of investment strategy, they can make regular payments consistently in specified intervals. Similar to investment concepts like participating in a company’s 401k, a contribution is made each time the individual gets a paycheck. These payments can be made on a weekly, bi-weekly, monthly or a quarterly basis. The choice is up to that particular individual and their preferences.