Open-end mutual fund types
You deserve praise for your forward-thinking. It’s never too early to start saving for the future. But you should really have a plan in place before you even think about investing.
Your road map is a financial strategy. You can use it to plan your route, gather the necessary supplies, and determine how to get to your destination. Your plan should incorporate investing. Additionally, investing is just one element of a sound strategy.
Having said that, you should check to see if you have a strong financial foundation before investing all of your money. Now that you can invest right away, you should also be making progress in these other areas.
Emergency Fund
Fund
Particularly if you are the main (or only) source of income for your young family, you should be setting aside money to cover emergencies. Your goal should be to save enough money to cover your fixed, ongoing expenses for anywhere between three and twelve months. In general, the higher your income, the longer it would take to find a replacement for your job. I will recommend targeting for something closer to 9 or 12 months
Insurance
Make sure you have enough coverage for your health, disability, property, and life. It’s not a good idea to solely rely on employer-sponsored benefits. You should raise deductibles on your property insurance to save money, which is another justification for having a sizeable emergency fund. Aim for life insurance that fully meets all of your fixed obligations, including: mortgage, loans, projected college costs) plus an amount that replaces your net income for at least 20 years (or when your kids may be expected to leave home). This also covers coverage for your spouse.
Retirement
This is a subject all by itself. Maximize your retirement contributions for the time being, though. You should at the very least plan to make a contribution that will enable you to receive any employer match. A separate spouse IRA (Individual Retirement Account) should also be budgeted for.
Investing
Consider investing your remaining funds. Except for your costs and allocation (as well as your emotions), you have limited control over investing. You can address all three with a plan. You must determine your level of risk tolerance before matching the type of investments with your time frame for investing. Consider more conservative investments, such as short-term bonds and specific large-cap stock funds, if you need money in a matter of years. On the other hand, you can allocate more money to more equity funds (Large Cap, Diversified Cap, Mid Cap, and Balanced Fund) the longer you have before you need the money.
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