Your guide to investing

Investing is one of the most powerful ways to supercharge your financial growth. Whether you’re gearing up for retirement or saving for shorter-term goals like a home or your child’s education, a well-diversified portfolio can help you outpace inflation, achieve your goals and create more financial freedom.

New to investing? Or feeling unsure about your current strategy? Don’t worry—Thrivent’s financial experts are here to answer your top investing questions and guide you toward wise decisions.

It’s a misconception that you need a lot of money to invest. In fact, you can open some accounts at Thrivent with as little as $50 per month.* Thrivent Wealth Advisor Ryan Paape, with the Apex Financial Group based in Appleton, Wisconsin, recommends using a strategy called dollar-cost averaging—where you invest a set amount of money at regular intervals, regardless of how the stock market is performing. Then, automate your transfers to put your investing on autopilot.

The earlier you can start investing, even in small amounts, the better off you’ll be in the long run because of earnings, which may include interest, capital gains or dividends. For starters, if you’re financially able and your employer offers a match within your employer-sponsored retirement plan, you’ll want to contribute at least the amount needed to receive the full match. But make sure you balance your investment activities with other priorities, such as building an emergency fund of three to six months of expenses and paying off high-interest debt.

When you invest, you are purchasing a security, or a tradable financial asset. Common types include:

• Stocks: A share of ownership in a company. For long-term growth, stocks may offer high-potential returns, but they come with more risk. 
• Bonds: A loan to a company or the government. Bonds typically provide stability and consistent income. 
• Mutual funds/exchange-traded funds: A portfolio of stocks and bonds purchased with funds from a pool of investors. Both offer a range of options to meet various risk appetites. 

Investing strategies and vehicles vary from person to person. The factors you’ll want to consider are your financial needs, objectives, goals, time horizon and risk tolerance, or the level of risk you’re comfortable with, says Mike Kremenak, president of Thrivent Funds. If you’re in your 20s and saving for retirement, you have a much longer timeframe and might have higher risk tolerance for investing than someone in their 50s who is closer to retirement or needs money for their kid’s college education in a couple years.

You typically invest in these securities through an investment account. You already may be investing in a retirement account, such as a 401(k) or IRA. If you’re looking for someone to do the investment management for you, a common way to start investing is by opening a brokerage account through a financial advisor. A brokerage account allows you to buy and sell investments. These accounts are often a mix of stocks, bonds, mutual funds and other securities. Or you can choose a self-service option by working directly with an investment firm.

As you build your portfolio, you’ll want to think about asset allocation, Paape says, referring to how you diversify your investments across various asset classes like stocks, bonds, cash and real estate. “Diversification is a pretty big factor in absorbing some risk versus having all your eggs in one basket,” agrees Brent Robinson, a Thrivent Advice Services consultant. Translation: If one investment tanks, your other investments can help balance out the downturn.

Whether or not to invest in the stock market depends on your personal appetite for risk. Stocks typically are considered to be riskier than other types of investments, like bonds or mutual funds, but they may produce the highest rewards in terms of return on investment. If you don’t need the money for decades and can handle the natural ups and downs of the market, stocks may be right for you.

You’ve likely heard the adage, “buy low, sell high,” which refers to buying stocks when prices are low and selling them when prices increase later on—but experts agree this isn’t a solid strategy. “Nobody has a crystal ball,” Paape says. “As we tell our clients, ‘It’s time in the market, not timing the market.’”

There’s no way to avoid market volatility, and the best way to weather the storm is diversification in your portfolio and time. “Stay invested,” Kremenak says. “If you look over a long period of time, such as 20 years, the stock market has always gone up.” And always avoid making an emotional decision.

If you are working with a financial advisor, you can check in with that person a couple times a year to go over your portfolio and to adjust or rebalance. However, if you find yourself monitoring your portfolio daily and panicking over every dip, that’s an unhealthy habit that could lead to poor investing choices.

“You can shift things over time, but it’s really helpful to have a plan and stick to it,” Kremenak says. “Make sure that any adjustments you’re making are well thought out and you’re not making emotional decisions due to short-term changes in the market.” He also suggests re-examining your investment strategy and risk tolerance as you age and if your financial situation changes, such as getting a new job where you’re making more or less money, going through a marriage or divorce, or adding to your family.

It can have a significant impact, depending on the types of investments you hold and how long you keep them. Capital gains, interest and dividends are taxable, so while diversifying your portfolio with a variety of assets helps mitigate risk, it also can help with tax efficiency.

All income, including retirement income, can be put into one of three tax buckets: tax now, tax later and tax never. Each has different implications for when you pay taxes owed on the dollars you’ve earned, whether that income is from a job or from investment interest and gains. Experts recommend a combination of the three. This could include certificates of deposit (tax now); stocks, bonds and some employer-sponsored retirement plans (tax later); and qualified withdrawals from Roth IRAs and Roth 401(k)s (tax never).

Advisors can guide you toward investment strategies that best meet your goals while keeping your overall financial plan top of mind.

“We have multiple tools to assess your situation,” Paape says. “Then we can come up with a framework, an investing objective and recommendations around what you should be considering. It’s important for everybody to have some type of framework to build off of as they move forward with investing, because it really drives how we make recommendations around risk, and how much you should be saving and where you should be saving.”