Personal Finance Professional Explains how 401(k) Plans, Robo-Advisors, Investment Apps can Help Grow Our Wealth

Erica Gellerman, a CPA, MBA, and personal finance expert, notes in a blog post published by Chime Financial Inc. (a US-based banking challenger valued at around $14.5 billion) that if you’re planning to grow your wealth or net worth, then investing can be “a smart way” to do it. Gellerman explains that making strategic investments can be quite “powerful” or beneficial in the long-term. 

Gellerman acknowledges that investments are almost never guaranteed to grow in value and sometimes they may do the opposite and actually lead to the investor losing their money. However, the main goal is to select investments that will (statistically) average steady growth over the years, even if there are some setbacks or “little bumps along the way,” Gellerman explains.

When we make an investment, we’re actually buying something (such as an asset) in the hopes or with the expectation that it will generate substantial returns, Gellerman noted. For example, we can make investments in stocks, bonds, mutual funds / exchange-traded-funds (ETFs), among many other options.

Gellerman recommends looking into retirement plans such as a 401(k), which she thinks are “a great place to start investing.” Many employers will provide a company match, which means that they’ll either partially or fully match your contribution towards the 401(k) plans (up to a certain amount). 

Gellerman also noted that in these types of investments, your contribution will be automatically deducted from your paychecks, so you don’t have to always think about it and the funds will go directly to your retirement account. 

While sharing other investment options, Gellerman noted:

“Robo-advisors are another easy entry into investing. Rather than having a human manage the money that you invest — which can be expensive and require you to invest a large amount of money — a computer does the work for a fraction of the price. And as a result, the amount of money you need to start with is lower.”

Notably, there are many different types of Robo-advisory services that have been introduced during the past few years. As reported earlier this month, the Kava DeFi platform announced it would release a Robo-Advisor service to automate strategies for financial services.

California-based Fintech firm Wealthfront, which also offers Robo-Advisory services, had introduced “self-driving” money last year.

Gellerman added:

“[Money manager] Betterment requires no minimum investment amount, and Wealthfront requires a minimum of $500. Robo-advisors will give you a simple questionnaire when you sign up to understand your goals to help the computer decide where and how to invest your money. This approach is meant to be very hands-off, but still check in on your investments. If there’s something you don’t understand, speak to a person working at the Robo-advisor for details.”

While sharing more investment options, Gellerman noted that you may want to consider using investment apps which can make it fairly easy to get started, right from your smartphone. You may initially invest with a relatively small amount and also invest in stocks, bonds, and ETFs. For instance, Public allows you to get started with just $5, meanwhile, Robinhood doesn’t even have a minimum investment amount. 

Gellerman concludes:

“There are plenty of options available for beginning investors, and starting small can help build up your confidence over the long run. Remember though, investing isn’t a short-term get rich quick strategy. When you jump in, make sure you do so for the long-haul.”

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