What’s the best way to save, and how much money should you save?
Most of the clients that I speak with have saved a lot of money in their U.S. bank and brokerage accounts. As such, we normally talk about the best strategies they can use to invest that money. But for folks who haven’t accumulated a lot of savings, here’s the most important thing they should know.
Save more
My nearly three decades of experience as a financial professional has taught me that many folks don’t save as much as they can. One common rule of thumb is to save 20% of your income. If you reach that level or more, you’re well on your way to building serious wealth.
Choose investments carefully
There are two principles that every investor should follow:
Keep in mind your time frame: Long-term investors can be more aggressive than short-term investors because they have time on their side to recover from potential losses. Though past performance is no guarantee of future returns, it makes sense for a growth investor to place assets in growth mutual funds, ETFs (exchange traded funds), or managed stock accounts. Short-term investors and other people who can’t afford or tolerate a potential loss should invest in more conservative investments like highly rated bonds, bank deposits, or money market funds.
Keep in mind your risk tolerance, and invest accordingly. A sound investment portfolio takes into account an investor’s risk tolerance. Only choose investments that correspond to your personal risk threshold. Licensed financial professionals are trained to do risk analysis scenarios with their clients. If you don’t know what your risk tolerance is or whether your current portfolio matches it, meet with a licensed professional.
Once you have accumulated savings and determined how you should invest, take the next step and open a U.S. brokerage account to help further your financial goals. For resources on how to do this, download the free Profile Toolkit (Profile-Financial.com/toolkit), a guide to opening U.S. brokerage accounts from overseas.
Douglas Goldstein, CFP®️ is the director of Profile Investment Services, Ltd. www.Profile-Financial.com He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation on how to set up your American assets to meet your financial goals. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.
Published April 12, 2017. Updated October 2020