- Making the right investing moves can help maximize your returns.
- The start of a new year is a good time to optimize your investment plans.
- This means choosing the right brokerage firm and account.
he start of a new year is the optimum time to make sure your brokerage is working for you.
Investing your money is one of the smartest financial moves you can make -- as long as you do it right.
The start of a new year is a great time to set investing resolutions for yourself to make sure you're getting the most value out of your hard-earned money. Here are four resolutions almost everyone should consider to limit their investing risk while making sure they maximize their possible ROI.
1. Don't pay unnecessary fees
Investing fees can reduce your effective returns, leaving you with much less money in the end. In fact, paying a fee of just 1% on a $1,000 investment earning an average 8% annual return can end up costing you $192 over 10 years. That fee could reduce your final balance from $2,159 if you'd paid no fees down to just $1,967.
A growing number of brokerage firms have eliminated investment commissions and other fees, such as account maintenance fees. Many also offer dozens of commission-free ETFs with low expense ratios. With so many options for affordable investing, avoiding unnecessary fees should definitely be one of your top investing resolutions for 2022.
2. Make sure you're using the right type of brokerage account
Brokerage firms offer many different kinds of accounts, including both taxable and non-taxable. Unfortunately, making the wrong choice could be a costly error.
For example, if you choose a taxable account to invest in for retirement when you'd be eligible to make a $6,000 deductible IRA contribution, you could end up costing yourself up to $1,320 in missed tax breaks if you're in the 22% tax bracket. On the other hand, if you choose an IRA for investments when you'll need the money soon, you could end up facing a 10% penalty on withdrawals.
To avoid losing money unnecessarily, resolve to use the right brokerage accounts for all your investing in 2022.
3. Invest as much as possible
The more money you invest, the bigger your potential returns. Your returns can be reinvested, thus earning more returns for you with no additional contributions necessary on your part.
This phenomenon, called compound growth, can help you increase your wealth substantially over time -- especially if you invest as much as you can and leave your money to grow for as long as possible.
To make sure you're making the most of your money, resolve to invest as much as you can in 2022.
4. Don't invest in anything you don't understand
Finally, you want to make sure you're reducing the risk of investment losses, which means you should only invest in assets you understand.
Whether you're putting your cash into cryptocurrencies, ETFs, or individual stocks, you should know the fundamentals of the investment, including how it makes money, what the risks are, how it's performed in the past, and how it stands apart from competitors.
By resolving only to invest in assets you understand, you’re more likely to avoid scams or unsavory investments, and can maximize the chances you'll make the most of your investment dollars.
Taking each of these four steps together can go a long way toward making sure you're a successful investor who makes the most of the opportunities available to you.
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