Hi, my name is Mei Carmer, and I am an Associate Financial Advisor here at Katterhenry Investment Group of NEST Capital. In case you missed our Finance 101 seminars, you’re in luck. Welcome to episode 7 of our 8 episode video series highlighting the various topics we discussed. In this video, we will continue our discussion on investing. We will discuss what to consider before you start investing and where to invest.

The first thing to consider when investing is knowing that it comes with risk, meaning that you can lose money by investing. That is why it is important to diversify your investments, which is a fancy word for not putting all of your eggs into one basket. Another thing to consider is your risk tolerance, which is how comfortable you are with volatility. Volatility is tied to market movement, not loss of money, but seeing the market fluctuate up and down. . You only lock in your losses when you sell. When considering your risk tolerance, you also need to consider your time horizon; how long do you have to earn a return? Things are more volatile in the short-term versus long-term. Once you’ve considered your risk tolerance and how much you want to diversify, you can then select your investment objective. This dictates what kind of investments you should choose; how aggressive are you wanting to be, and are you seeking growth, income, or both? 

Where to invest is two-fold: what type of account and the location where that account would be held. There are many different types of accounts you can open and each one has different characteristics. The first is a standard brokerage account. This can be held individually or jointly. There are no income or contribution limits. In this account you pay taxes on the gains in the account, and you can pull the money out whenever you want without penalty. The next is a Traditional IRA, with IRA standing for Individual Retirement Account. For 2024, you are able to contribute $7,000, $8,000 if you are over 50, to the account for the year, and depending on your income, you may be subject to a tax deduction. The contributions in this account are made pre-tax and grow tax-deferred. You pay taxes on the money when you pull it out. Because this account is for retirement, you are not allowed to withdraw your money before 59 ½; if you do you will be hit with a tax penalty. The government does want their money, so at a specific age, for 2024 that is 73, you are required to start taking a set amount of money each year and pay taxes on it; this is called a Required Minimum Distribution. Another retirement account is a Roth IRA. It has the same contribution limits as a traditional IRA, but there are income limits on being able to contribute. You also fund this account with after-tax money. Qualified distribution are federally tax-free provided it has been more than five years since the Roth IRA was funded AND the owner is at least age 59 1/2. You can pull out your contributions at any time without consequence, but any of the gains pulled out early may be subject to a tax penalty. Another place you can invest is through your place of employment, if they offer it. Many employers sponsor retirement plans for their employees as a benefit; the type of account will depend on the workplace. It could be a 401k, 403b, Simple or SEP IRA to name a few. Each plan operates a little differently, and I’d ask your employer if they offer a plan. One very important thing to keep in mind is that all of these are just accounts; you actually have to choose to invest the money you put into them or it will just sit there.

Now where can you open up an account? Aside from employer-sponsored plans where you really don’t have a say, for brokerage and IRA accounts, you could choose to work with a financial advisor at a full brokerage practice, you could do it yourself at an online discount brokerage company, or you could let algorithms decide and use a robo-advisor. It all depends on how much control or how much help and advice you want. This has been episode 7 of our 8 episode Finance 101 Video series. Episode 8 will talk about retirement.

Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), Member SIPC. Katterhenry Investment Group of NEST Capital is a separate entity from WFAFN.