How to Invest for the Future

How to Invest for Future - picture of coin stacks with seedlings growing out of them

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This article was written by our guest Kevin from Just Start Investing. All thoughts expressed are solely those of the author. Enjoy!

Everyone wants a better future, right?

Of course! We all want a better job, nicer house, and health and happiness overall.

I’m sure financial security and a path to retirement is on the list as well.


If it is, we’re not doing a great job of preparing for it! A large number of Americans don’t have anything saved for retirement. In fact, according to new data from Northwestern Mutual’s 2019 Planning & Progress Study, 15% of Americans have no retirement savings at all.

Potentially even more shocking is that the same study found that for 2019 only 10% of Americans are confident that they’ll have enough put away for retirement, and on average, people say there’s a 45% chance that they’ll run out of money in retirement.

Despite all of that, 41% say that they haven’t taken any action to address the issue!

Let’s try to change that now. Below we’ll walk through how to invest for your future so that you can have the retirement that you deserve.

Why Investing is Important

To put it bluntly, it’s nearly impossible to retire without investing. That math just doesn’t work out (which we’ll run through below).

That’s why, contrary to popular believe, not investing can actually be more risky than investing in some cases!

Investing vs the Mattress

There is nothing worse than stuffing your money under your mattress (or in a hole in the backyard, or in your sock drawer, etc.). Not only is it incredibly risky because there is no bank guarantee on your money, but also because your money is losing value to interest every single year.

I know none of you are doing that though…

…but just in case, here’s what would happen if you were to shove your cash under your mattress.

Your money would not be accumulating any value from interest, dividends, or returns of any kind. As you’ll see in the example below, $1,000 would stay at $1,000 for the next 40 years and it would actually be worth a lot less than it is now.

Assumptions for graph below:

  • Investing $1,000 in equity index funds with a 7% annual return
  • Doing the mattress thing with $1,000 with 0% annual return

How to Invest for Future - graph of returns from stocks vs mattress

That’s right, you’d miss out on over $12,000 (over 1,000% growth)!

Investing vs Bonds

Don’t get me wrong here, investing in bonds can be a good strategy for both diversifying your portfolio and increasing your odds of steady returns every year as you get closer to retirement age.

That said, they should likely not be your only strategy. As you’ll see below, even with a 3% return, they still drastically under-perform what a stock fund could do for you.

Assumptions for graph below:

  • Investing $1,000 in equity index funds with a 7% annual return
  • Investing $1,000 in bonds with a 3% annual return

How to Invest for Future - graph of returns from stocks vs bonds

Your Investing Options

So we’re all on board now: investing is important.


Now, what are your options?

There are a few strategies you can implement, but we’re focusing on two simple ones. We’re keeping it as simple as possible so that you can get started today, and because complicated does not always mean better. Especially when it comes to investing.

Do it Yourself with Index Funds

Do it yourself investing is not as hard as it sounds. We’re not talking about stock picking or options trading, but instead investing in a few low cost index funds and/or exchange-traded funds (ETF).

There are five steps to go through when investing in index funds:

  1. Decide on Your Investment Account
  2. Select an Online Broker
  3. Determine Your Initial Deposit
  4. Choose Your Investment Vehicles
  5. Set an Ongoing Strategy and Maintenance Plan

You can get a full guide on how to start investing in index funds here.

When it comes to personal brokerage accounts and IRAs, you’re able to choose where you invest. Charles Schwab, Vanguard, and Fidelity are all reputable (and popular) online brokers who offer a wide variety of low cost funds.

When investing in a 401(k) or similar employer sponsored account, you’re unfortunately limited to whichever broker your employer chooses. Therefore, you are also limited to the index fund and ETF selections within that broker.

Use a Robo-Advisor

Robo-advisors are online platforms that do 99% of the work for you when it comes to investing. Most will ask you to complete a series of questions before opening an account. Then, the robo-advisor will automatically select investment vehicles for you based on your answers.

Doesn’t sound too bad!

And it’s not, except for the price tag. You will pay more to have a robo-advisor manage your investments for you than if you managed them yourself. Though, you will still pay substantially less than hiring someone else (a real human!) to manage them for you.

There are two instances when robo-advisors can be especially useful:

  • Personal Accounts: Robo-advisors like Betterment can assist in managing personal accounts, like brokerage accounts, IRAs, etc.
  • 401(k)s: Blooom is a relatively new robo-advisor that specializes in managing 401(k)s. They offer a free analysis and ongoing management for a flat rate (which can lead to huge savings in fees for you as your 401(k) continues to grow).

What to Avoid

Knowing what to look for is a great start, but knowing what to avoid can also be helpful. Here are the two biggest things to look for:

  • High Cost Mutual Funds: The expense ratio on any index fund or ETF you buy should be 0.25% or lower. Really, you can find expense ratios for below 0.10% pretty easily these days. Mutual funds have a bad reputation of having high expense ratios and other fees baked in (like load fees, etc.), so it can sometimes be best to avoid them all together.
  • Trying to Pick Stocks: Picking stocks is kind of like going to Vegas (except, truthfully, the odds aren’t quite as terrible as Vegas). Why risk losing it all when you can essentially act as the house and increase your chances of capturing returns of the whole market? Sure, with stock picking you could get huge 200% returns in one year, but you could also get devastating 100% losses. To me, the risk of the second outcome is not worth the potential get-rich-fast upside.

Summary: How to Invest for the Future

The first step in investing for the future is deciding to start!

It has to be a priority. From there, everything else is relatively easy. Don’t let Wall Street jargon scare you away.

Choose a simple strategy that works for you and stick with it. Your future self will thank you. How to Invest for Future Pin - picture of coin stacks with seedlings growing out


Kevin runs the personal finance website Just Start Investing, where he focuses on making investing easy. Just Start Investing has been featured on Business Insider, Forbes, and US News & World Report, among other major publications for his easy-to-follow writing. Check out Just Start Investing to learn the simple strategies to start investing today, as well as ways to optimize your credit cards, banking and budget.

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One Comment

  1. Investment and savings are necessary steps for any business and individuals. Think of Yourself First. Contrary to what you might think, the most important way to protect the financial future of your family is to prioritise your needs first.

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