Creating a financial folio can be a stressful process for first-timers.

It can be a daunting experience to try and start a financial folio on your own. However, once you’ve decided to start investing, the process can be made easier by preparing.

That’s why we’ve tried to streamline this experience by outlining all the basics that you’ll need to know in the article below.

Grow Your Savings

The first step in beginning your financial folio is to organize your savings. After all, proper investments can’t be made without solid savings accounts which is why all first-time investors should consider splitting their savings into different areas.

The first should be an emergency fund where the money can be withdrawn at any time in case unexpected expenses come and you need access to it immediately. The second will be a medium-term savings account (anything over the term of 2-6 years) where a higher interest rate will be earned on the money in the future.

The final area you may want to consider holding your savings is a long-term investment account like an RRSP or TFSA where you can expect these savings to increase substantially over time.

Decide What Type of Assets You Want to Own

Once you’ve established a solid savings plan for your money, the next step is to decide what type of assets you want to own. This decision will likely be impacted by the amount of time, risk, inflation, and annual growth rate you will want on it.

It’s important to note that each type of asset can have its benefits and consequences which is why it’s vital to consider the risks before selecting. Some of the different types of assets that can be chosen from are: stocks, privately held businesses, publicly traded businesses, fixed-income securities (bonds), or real estate.

Determine How You Want to Own Your Assets

If you’ve already decided what type of investments you’d like to hold, the next step is to determine how you would want to own these assets. For example: if you chose to invest in a publicly traded business you will need to determine if you will outright own the shares or if you will go through a pooled structure to do so.

This decision can have a significant impact on your return which is why it should be carefully considered prior to investing and discussed with a financial professional to better understand the risks involved with it.

Know Where You Want to Hold Your Assets

The next step of beginning your financial folio is to decide where you will want to hold your assets. This decision is important because it will have a substantial impact on how your money will be taxed by the IRS. For example, if you decide on a taxable account (such as a brokerage account) you will pay taxes on the amount in it immediately, but you will have easier access to it.

If you choose to hold your money in a tax-sheltered account such as a 401(k) or Roth IRA, you will have a much harder time accessing the funds until the term is complete. However, you get a tax deduction at the time you deposit the money and hold off on paying then unit it’s withdrawn the future.

Automate Your Investments

The final step that you will need to take to begin a financial folio is to automate your investments. Once you’ve decided what type of investments you want to be involved in, and how, the process of investing can be made much easier by automating the amount of money that’s transferred between accounts.

Automating will help by preventing you from accidentally forgetting to re-invest in the future. In turn, help you grow your account without worry.

Beginning an investment folio can seem like a daunting experience. However, with the right education and proper guidance, the process can be both lucrative and simple. If you’re interested in beginning a financial folio but are unsure where to start to get in touch with a member of our team for some guidance today.

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