How To Get Started Investing

by Drew Snider, CFP®

Director, Financial Planning, Coastal Credit Union, Financial Advisor, CUSO Financial Services, L.P.


We know that investing for our long-term goals is a good idea but how do you get started? You may already be investing in your 401(k) plan at work, but do you know how to choose right investment options in the plan? Or, maybe you want to start an investment plan outside of your 401(k). This article will help you navigate the way.

But First … Some Things To Know

Before you start investing consider the following:

  1. Organize your finances –  Remember, investing is just one component of your overall financial plan. Get a clear picture of where you are today. Establish a solid financial base: Make sure you have an adequate emergency fund, sufficient insurance coverage, and a realistic budget.
  2. Assess your risk tolerance – Everyone feels differently when the value of their investment account goes down. You need to decide what level of volatility is right for you. Consider discussing your concerns with a financial advisor or use an online risk assessment tool to determine what amount of risk is right for you.
  3. What type of account should you open? – Before you can make an investment, you first need to open an account that will hold your investments. What type of account and who owns the account are important decisions. Often the goal of the investment will lead you to the type of account to open. For example, if you are investing for a child’s college you might consider a 529 college savings plan or Coverdell Education savings account due to their tax advantages. A retirement goal could lead you to a Roth IRA. Who owns the account is important too. A joint account with rights of survivorship will allow you and the joint owner, like a spouse, to have equal access to the investments and will pass at death to the surviving owner without going through probate.

Stocks, Bonds, Mutual Funds, Crypto: What To Buy?

The number of investments you can buy seems limitless and can be overwhelming for many just getting started. The financial media likes to use jargon and insider terms but don’t worry, here’s a summary of your primary choices.


Stocks represent shares of ownership in a corporation. When you buy stock, you become a part owner of that corporation. As a stockholder, you can make money in one of two ways. First, some companies distribute part of their profits to stockholders as dividends. Some investors purchase these stocks purely for their income potential and are less concerned with the prospect of capital growth. It should be noted that companies can suspend dividends at any time as was recently witnessed during the unforeseen financial stresses caused by COVID.

Some companies reinvest in themselves instead of distributing their profits to shareholders. As these companies grow, the price of their stock could increase or appreciate in value. This is called capital appreciation. You can profit from these stocks by selling them for more than the original purchase price. Conversely, if the company experiences financial hardship, the price of their stock can fall.


Bonds are issued by different entities, including the U.S. Treasury, corporations, and municipalities. Bonds are like IOU’s given by the issuer, like the State of North Carolina. You buy the bond from the state and then receive interest, usually monthly for a specified period, say 10 years. At the end of the period the State of North Carolina returns to you the face amount of the bond.

Bonds are subject to interest-rate, inflation, and credit risks, and they have different maturities. As interest rates rise, bond prices typically fall. The return and principal value of bonds fluctuate with changes in market conditions. If not held to maturity, bonds may be worth more or less than their original face value.

Mutual Funds and ETFs

Mutual Funds and exchange-traded funds (ETFs) are portfolios of securities (stocks and bonds) assembled by an investment company. Their underlying investments are typically selected to track a particular market index, asset class, or sector — or they may follow a specific strategy. Because these funds can hold dozens or hundreds of securities, they could provide greater diversification at a lower cost than you might obtain by investing in individual stocks and bonds. Diversification does not guarantee a profit or protect against loss; it’s a method used to help manage investment risk.

Despite their similarities, there are key differences between these types of pooled investments.

You can invest in mutual funds through investment companies and employer-sponsored retirement plans. Mutual fund shares are typically purchased from and sold back to the investment company, and the price is determined by the net asset value at the end of the trading day.

By contrast, exchange-traded funds (ETFs) can be bought and sold throughout the trading day like individual stocks. You might pay a brokerage commission when buying or selling ETF shares. The price at which an ETF trades on an exchange is generally a close approximation to the market value of the underlying securities, but supply and demand may cause ETF shares to trade at a premium or a discount.

Real Estate

Real estate can be a bought in a variety of ways. Many people own a residence as their only real estate investment, but others buy homes for rental income. If you want to own real estate but don’t want the responsibility for upkeep, an investor can buy a Real Estate Investment Trust (REIT). REITs are investments made in commercial property where the REIT manager is responsible for all aspects of property management and pass a portion of the rent received from their tenants to the investors.

An Annuity

An Annuity is a contract between you and an insurance company. In return for the regular payments you make during the annuity’s accumulation phase, the company agrees to pay you regular income during the annuity’s payout phase (usually in retirement). Contributions to annuities are made with after-tax dollars and any earnings accumulate tax deferred. However, annuities are designed for retirement savings, so most distributions taken before age 59.5 are penalized 10%.

There are three main types of annuities: fixed, variable, and indexed.

Fixed annuities offer a guaranteed rate of return, so your investment pays a set yield no matter how the market performs.

With variable annuities, you can invest in a variety of investment subaccounts (that can hold stocks and bonds) whose value may fluctuate with market conditions. The investment objectives of the subaccounts can range from conservative to aggressive. A variable annuity may outperform a fixed annuity, but there are no guarantees. If the markets experience hard times, variable annuity investors run the risk of losing accumulated earnings and even principal.

Indexed annuities are designed to combine the benefits of fixed and variable annuities by offering guaranteed protection of principal with the potential for additional gains. The performance of an indexed annuity is tied to a market index such as the S&P 500. When the index rises, so does the return on the annuity. But if the index tumbles, typically the worst the annuity can do is earn no interest — or a guaranteed minimum, if one is offered. The guaranteed minimum is contingent on holding the indexed annuity until the end of the term. In this way, indexed annuities allow investors to pursue market gains while still protecting their principal.

Any annuity contract guarantees are contingent on the financial strength and claims-paying ability of the issuing insurance company.

Speculative Investments

Speculative investments and “hot stocks” make for interesting headlines in the financial media and other online forums. Right now, Cryptocurrencies, Special Purpose Acquisition Companies (SPACs), gold and other precious metals are very popular. When considering a speculative or “hot” investment always understand the risks of losing your money, if the investment is liquid, and what will cause the investment to increase in value.

Investment Strategies

Once you have decided it’s time to pull the trigger and open your investment account, it’s wise to consider some proven investment strategies to help improve your chances for success. Here are a few different strategies worth considering.

Dollar-cost Averaging

Dollar-cost averaging involves investing a set amount of money at regular intervals on an ongoing basis in order to accumulate money over time. Here’s how it works.

An individual invests a specific amount of money in a mutual fund or the stock market at regular intervals — say $100 each month. That $100 automatically buys more shares when prices are low and fewer shares when prices rise, resulting in an overall lower cost per share over time. An individual must have the ability to continue to make purchases over time for this strategy to be effective.

Asset Allocation

Asset allocation is a systematic approach to diversification that determines an efficient mix of assets for a given investor, based on their individual needs.

This fundamental strategy involves strategically dividing a portfolio into different asset categories — typically, stocks, bonds, and cash alternatives — to seek the highest potential return for an investor’s risk profile. It utilizes sophisticated statistical analysis to determine how different asset classes perform in relation to one another, and its goal is to achieve an appropriate balance of security and growth potential.


Diversification is a basic principle of successful investing. It involves investing in a variety of investments and asset classes to help limit exposure to losses in any one sector of the market.

Different types of investments may react to changing market conditions in different ways. For example, an unfavorable news story may push stock prices lower, while bond values rise, or vice versa. When you divide your money among various investments, gains in one area can help compensate for losses in another.

Tax Managed Investment Strategies

Tax managed investment strategies aim to reduce the amount of taxes an investor pays in their non-qualified investment accounts. Investment companies that offer these strategies use investments that have tax advantages like municipal bonds and stocks that pay qualified dividends. They also actively buy and sell investments within the account to continuously offset gains and losses. This active management can reduce an account holder’s capital gains taxes.

Advocacy Investing

Advocacy investing involves investing in companies that align with your personal values. This strategy invests in companies that “do good” for their employees, community and/or the environment. Socially responsible investing or ESG (environmental, social, governance) investing are common names for this strategy. This style of investing has increased in popularity over the past decade. An investor can do research and choose the companies they want to own or they can choose a mutual fund ETF that has the socially responsible criteria they are looking for. Some investors may also want to invest in companies that adhere to specific faith-based parameters.

Pulling It All Together:

  1. Have a financial plan
  2. Identify your investment goals
  3. Assess risk tolerance
  4. Choose an investment strategy
  5. Achieve your goals!

Looking To Get Started With Investing? Let’s Talk.

We’re here to help you develop your investment plan and stay on track to reach your goals. As a Coastal member, you can connect with one of our CFS* Financial Advisors to schedule your free retirement plan review. We can assess your current retirement income strategies to see if you are on track to meeting your financial goals.

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© 2021 Broadridge Investor Communication Solutions, Inc.

*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. ("CFS"), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. Coastal Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.

Trust services available through MEMBERS Trust Company. CFS and Coastal Credit Union are not affiliated with Members Trust Company.