3 Ways to Get Comfortable with Investing This Year

Does the word “investing” make you run for the hills? If so, you’re not alone. Heather Pelant shares how you can gain more confidence as an investor this year.

“When I grow up, I want to be an investor,” is never something I hear when talking with my daughters about their future selves. The irony is that they already are investors through their education savings accounts, and they almost certainly will be for the rest of their lives. This disconnect between what we say and what we do is not unique.

Amazingly, 69 percent of Americans don’t think of themselves as investors, according to BlackRock’s 2015 Investor Pulse survey. Our research shows people feel nervous about investing because they think it’s risky (37 percent) or complicated (47 percent). A whopping 60 percent of average Americans compared investing to gambling, in contrast to only 45 percent who feel comfortable making their own investment decisions.

But in reality, like my daughters, most of us are investors. Six out of 10 of us are “saving” for retirement. If your money is in a 401(k) or IRA, then it’s very likely invested in mutual funds or exchange-traded funds (ETFs).

So as you head into this New Year, turn a fresh page on your relationship with investing and make a pledge to do a few simple things that will allow you to wear your investor badge confidently.

Make a plan

Just 14 percent of Americans have a formal financial plan for retirement, but three-quarters of those people feel confident their money will last through retirement. If you want to be part of this small, confident group, determine how much retirement income you want by a certain age, and then map an investment strategy to navigate that path. You don’t have to do this alone. A financial advisor or online financial resources can help.

The sooner you start the better, because the longer you let your money work for you, the less you’ll need to set aside today to meet those goals. And you’ll be able to take on a little more risk for greater potential returns.

Read your statements

If you don’t read your retirement account statements, you’re not alone. Only 28 percent of Americans actually review the performance of their savings or investments regularly. And less than 20 percent know how much income they’re earning or examine their holdings. Rather than throw them in a pile or click delete, open up those statements and take a good look at them.

While they can be loaded with jargon and (important) legalese, the key areas to focus on are:

1. Asset classes: Most good statements or account websites will break down the percentage of stocks, bonds, cash and other types of investments you hold, and let you know if they gravitate toward aggressive or conservative. Make sure you are properly diversified depending on your goals and time you have to invest.

2. Expense ratios: These are the underlying fees and costs of the fund which can eat into your total returns. ETFs tend to have cheaper expense ratios than actively managed mutual funds, so make sure you’re getting your money’s worth.

3. Market performance: Compare the gains or losses of your total portfolio to the performance of major indexes such as the S&P 500 or the Barclays Global Aggregate bond index. Are you doing better than those benchmarks?

This isn’t something you should be doing every week or even every month, as the near-term bumpiness of the market can be disconcerting. If you’re invested for the long term, reviewing once or twice a year is fine to make sure you’re on track to meeting your goals. If you’re getting closer to the time when you’ll need your savings, then perhaps look at them quarterly.

Get educated

Conquering fear of the unknown can simply be done by knowing more. You do not need an MBA to be an engaged investor. One easy way to act on your resolution is by subscribing to a financial news magazine or newspaper, or even just reading the business section of your regular newspaper. Understanding what is happening in the global and local markets can bring home how these events may affect your investment returns. But be careful about overreacting to noisy headlines, and stay focused on your goals.

If you choose to work with an advisor, find one who will answer all of your questions. And read the informative emails and newsletters you get from your advisor or brokerage firm. Finally, keep visiting the BlackRock Blog, which covers a wide range of investing topics daily.

It’s an old, but true, cliché that knowledge is power. So if your New Year’s resolutions include a financial makeover, start on the pathway to success by understanding who you really are — an investor.

Heather Pelant is Head of BlackRock Personal Investing for BlackRock. She is a regular contributor to The Blog.

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of November 2015 and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this post is at the sole discretion of the reader.

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