How to Start Investing at 50 and Secure Your Future
Figuring out how to start investing at 50 can feel daunting, especially if you’re coming out of a significant life change like a divorce and haven’t been focused on investments before.
I vividly recall my own entry into investing—it felt like stepping into a maze of confusing jargon and choices, and I wasn’t sure where to begin.
By taking small, manageable steps, I discovered that ETFs offered a practical, straightforward way to start investing. They’re designed to be cost-effective and simplify the process of building a diversified portfolio, which makes the whole experience feel much more approachable.
What impressed me most was how accessible ETFs turned out to be. With the help of modern technology, getting started was easier than I had anticipated, and it didn’t feel nearly as intimidating as it once did.
With the right support, ETFs can become a valuable tool for moving towards your financial goals with confidence.
Just as I found that investing wasn’t as scary as it first seemed, you might find that ETFs are a perfect way to create a secure and balanced financial future.
It’s all about starting with what feels doable and gradually building your confidence.
Disclaimer: The information on this blog reflects my personal experiences and is not professional advice. Please consult a certified financial planner before making any financial decisions to ensure they are right for your unique situation.
What Are ETFs?
ETFs, or Exchange-Traded Funds, are investment vehicles that combine the features of both stocks and mutual funds.
They allow you to invest in a diversified portfolio of assets—such as stocks, bonds, or commodities—all in one single purchase.
For many women over 50, investing in ETFs can be a way to address past financial struggles and emotional challenges, such as those encountered during a divorce or significant life changes.
The world of finance might feel overwhelming, but ETFs provide a practical and less intimidating approach to investing.
By focusing on diversified, low-cost options, you can move toward financial stability and healing, making positive strides beyond previous setbacks.
RELATED: 5 Steps To Heal Money Wounds
Why Consider ETFs?
Many women over 50 are in a unique financial position—perhaps you’re nearing retirement, have already retired, or are simply looking to grow your savings while minimizing risk.
ETFs offer an accessible way to invest, even if you’re not a seasoned investor. Here’s why:
- Diversification: ETFs typically hold a wide range of assets, which helps spread risk. For instance, instead of buying individual stocks, an ETF might invest in 500 different companies. This means if one company underperforms, your overall investment is less affected.
- Lower Costs: Compared to mutual funds, ETFs generally have lower expense ratios. This is crucial for those who want to minimize fees and maximize their investment returns.
- Flexibility: Unlike mutual funds, ETFs trade on the stock exchange, so you can buy and sell them throughout the day, just like stocks. This gives you more control over the timing of your investments.
- Income Potential: Many ETFs pay dividends, which can be a reliable source of income, especially during retirement.
How Do ETFs Work?
Imagine you’re interested in investing in the tech sector, but the idea of picking individual stocks feels overwhelming.
Instead of researching and buying shares of multiple companies, you could purchase an ETF that tracks a tech-focused index, like the NASDAQ-100. This ETF would automatically spread your investment across a variety of tech companies.
Here’s a step-by-step look at how investing in ETFs works:
- Choose Your ETF: Depending on your financial goals, you can choose from a wide range of ETFs. Some focus on specific sectors like healthcare or technology, while others are more diversified.
- Buy and Sell: ETFs are bought and sold through brokerage accounts, much like stocks. You can purchase them at any time during the trading day.
- Track Your Investment: ETFs are managed to track specific indexes, meaning their value will rise and fall with the market. Keep an eye on your investments, but remember that ETFs are often best for long-term growth.
What You Can Expect from Investing in ETFs
Investing in ETFs is generally less risky than buying individual stocks, but it’s important to understand that all investments come with some level of risk. Here’s what you can expect:
- Steady Growth: ETFs are often seen as a more conservative investment choice. While you might not see explosive growth, you can expect a more stable and steady increase in value over time.
- Market Fluctuations: Like all market-based investments, ETFs will fluctuate in value. However, because they are diversified, the impact of these fluctuations is often less severe compared to individual stocks.
- Income Streams: Many ETFs pay out dividends, which can provide a regular income stream—a significant benefit for women over 50 who are planning for or are already in retirement.
Read more about how ETFs are particularly suitable for retirees and those nearing retirement due to their ability to provide quick and cost-effective broad diversification across asset classes and geographic regions, reducing exposure to single-stock risks.
Comparing Costs: ETFs vs. Mutual Funds
When it comes to investing, cost is a crucial factor to consider. Exchange Traded Funds (ETFs) often come out on top compared to mutual funds, thanks to their lower expense ratios.
While mutual funds can have higher management fees and additional charges, ETFs typically offer a more cost-effective alternative.
However, it’s important to be aware of the various costs associated with ETFs:
Expense Ratios: ETFs generally have lower expense ratios than mutual funds, usually ranging from 0.05% to 0.75%. These fees cover the cost of managing your investment and, while relatively low, can accumulate over time, especially with long-term investments.
Brokerage Fees: Some brokers impose a commission fee when you buy or sell ETFs. To minimize these costs, look for brokers that offer commission-free trading.
Bid-Ask Spread: This is the difference between the buying and selling price of an ETF. Though typically small, it’s worth noting, particularly if you trade frequently.
Understanding these costs will help you make more informed decisions and maximize the benefits of investing in ETFs.
Fidelity has a great article on information and comparison about the difference in costs between ETFs and mutual funds.
Top ETFs to Consider for Women Over 50
As you step into the world of investing, especially if you’re new to it or looking for a fresh start after a significant life change, like retirement or a divorce, ETFs can be a strategic choice.
They offer a balanced way to build your investment portfolio with diversification and lower risk.
Here are a few ETFs that might align with your financial goals and investment preferences:
- Vanguard Total Stock Market ETF (VTI) provides comprehensive exposure to the entire U.S. stock market, which is ideal if you’re looking for broad diversification across various sectors and market caps. It’s a solid foundation for any portfolio.
- Tracking the performance of the S&P 500, SPDR S&P 500 ETF Trust (SPY) includes 500 of the largest U.S. companies, making it a dependable option for those aiming for steady, long-term growth.
- If you’re interested in diversifying beyond the U.S., iShares MSCI EAFE ETF (EFA) offers exposure to international markets, focusing on Europe, Asia, and the Far East. It’s a practical way to add global investment opportunities to your portfolio.
- Vanguard Dividend Appreciation ETF (VIG) targets companies with a history of increasing their dividends, providing both income and growth potential. It’s particularly useful if you’re looking for stable income along with potential for capital appreciation.
These options offer a blend of growth, income, and diversification, tailored to meet a variety of investment goals as you navigate this new chapter in your financial life.
Growth ETFs, which bundle high-growth assets into one easy-to-buy fund, offer impressive long-term returns and save research time; however, predicting shifts between growth and value styles can be challenging, with value historically dominating since 1927—learn more about choosing the best growth stock ETFs here.
Is Investing in ETFs Worth It?
For women over 50, ETFs can be an excellent addition to a retirement portfolio. They offer diversification, income potential, and a relatively low-cost way to participate in the stock market.
While ETFs are generally a safer option, it’s still important to understand your risk tolerance and investment goals. ETFs are best used as part of a broader financial strategy that includes other types of investments, such as bonds or real estate.
Final Thoughts
ETFs can be a powerful tool for women over 50 who are looking to grow their wealth, generate income, or simply get started with investing.
Whether you’re new to investing or a seasoned pro, the flexibility, cost-effectiveness, and diversification that ETFs offer make them a compelling choice for anyone focused on securing a financially stable future.
QUESTION: Are you considering adding ETFs to your investment portfolio? What questions do you have about getting started?
This was incredibly informative and I’d like to start investing now in my life. You can never start too early, right? thanks for this!
This is really helpful, thank you so much for sharing! I think it’s so important to learn about investing and securing our futures
I’ve always wanted to invest but it’s always seemed so intimidating and confusing to me. I have to do a little research on the topic but it has a been something I’ve been thinking about so I think this might be a sight to set it up.