Growing wealth by investing is something we all know we should do. If you’re busy with graduate school, however, putting aside money for the future might not be near the top of your priority list. By following certain strategies, though, you can grow your wealth even in the midst of the strain on time and resources that comes with graduate school.
Use a Roth IRA:
An individual retirement account (IRA) is a tax-advantaged plan for accumulating retirement savings. There are two types of IRAs: traditional and Roth.
In a traditional IRA, contributions are tax-deductible in the year they are made, but withdrawals in retirement are fully taxable.
In a Roth IRA, you pay taxes on contributions now, but income taken later is completely tax-free. That makes the Roth IRA perfect for those who may be earning less now but have a large potential for earnings later. That describes most graduate students, and if it sounds like you, then a Roth IRA may be the right fit.
Take advantage of your employer’s 401(k) contribution match:
If you are working your way through graduate school and your employer offers a 401(k) plan, then you might be entitled to money that will significantly boost your investment plan.
As an incentive for long-term saving, many employers will match their employees’ contributions to their retirement plan up to a certain percentage. For example, if your employer offers a 4% match, then they will kick in the same amount that you contribute, up to 4% of your salary.
That’s basically free money, and it’s sure to boost your wealth.
If you’re young, invest aggressively:
Riskier investments such as stocks offer more upside potential than more conservative instruments such as bonds. It’s true that stock prices do fall sometimes, but if you have several decades until retirement, you will have time to bounce back from short-term market fluctuations.
That’s why many experts recommend that younger investors pursue more aggressive investment strategies. You can take advantage of large gains now, and lock in your earnings by moving into safer assets once you’re closer to retirement.
Use low-cost exchange-traded funds:
Regardless of the asset class in which you choose to invest, the most cost-effective way to do it is probably with an exchange-traded fund (ETF). An ETF is a fund that collects money from many individuals and invests in accordance with a stated investment objective.
EFTs invest in everything from stocks to bonds to precious metals and alternative investments. What makes them really attractive is their low operating expenses. Many ETFs can be bought without incurring sales commissions, and the annual fees are sometime in the single basis points. A basis point is a hundredth of a percentage. That means if you had $10,000 in a fund that charged 5 basis points, you would only be charged $5 per year – leaving more earnings for you.
Davenport Laroche is a leading shipping container investment agency based out of Hong Kong.