This big mistake is very common among new investors, according to Tori Dunlap

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Invest or move it – but don’t let it sit there.

key point

  • Dunlap said many new investors fail to invest the money they put in retirement accounts.
  • The cash in your investment account doesn’t grow; in fact, it loses value due to inflation.
  • If you really want to hold cash, put it in a high-yield bank account.

Starting anything new often comes with a learning curve.but when that New things As complicated as learning how to invest – well, the curve is more of a cliff.

Thankfully, there are plenty of resources available for new investors. These include many experts who are happy to share their advice and experiences.For example, Tori Dunlap, author financial feministis a seasoned investor who shares tips and tricks through her books, podcasts and website.

According to Dunlap, new investors tend to make many of the same mistakes. most common? Failing to properly invest their retirement savings.

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Saving money is just the beginning

At this point, most of us know that we should put some money into a retirement account each year (or, ideally, every paycheck). For those with traditional employers, it’s made easier because they’ll usually do it for you — usually with an employer match.

But putting your money into your 401(k) or IRA is only half the battle.Once it’s there, you have to actually do something use it. That’s where new investors often fail, Dunlap said.

“What’s the most common mistake I see first-time investors make? Putting their money in a Roth IRA instead of actually investing it,” she tweeted. “I call it financial purgatory. Don’t let this be you.”

Depreciation of cash in investment accounts

Putting cash into your investment account gives you: cash, which happens to be in the investment account. It stays that way until you get into your account and use the money by investing.

exception? A person who has an account actively managed by a stockbroker. This could mean you have a human broker, or it could mean an account managed by a robo-advisor. In either case, you will incur an additional fee to have a third party handle your investments on your behalf.

So why is it so important to invest cash in your retirement account? Because cash doesn’t grow. If you haven’t invested in stocks, bonds, mutual funds — something – then you don’t get any benefit from this investment. In other words, your money is not growing.

In fact, your cash is actually lose Worth as it sits there – especially these days. Why? inflation.

As inflation increases, the purchasing power of your cash decreases. If it doesn’t make more money for you by investing it, it will only continue to depreciate.

Inflation and a depressed market?

Looking at the upheaval in the stock market this year, you might think cash is better than investing in a market that seems to be on a steady decline. But the data isn’t so certain.

inflation is High. Current rates have risen 8.3% over the past 12 months. In practical terms, that means your cash value is 8.3% lower than a year ago.Depending on how you’ve invested during this period, your investments may fall even more – or they may have lost money less Worth more than the cash you’re sitting there with.

Of course, this is a short-term outlook. Investing is a long game. For decades, the stock market has historically provided returns that not only outpaced inflation, but also increased wealth.

Is growth guaranteed? No, of course not.but there is nothing is truly secure in life (except death and taxes as we all know).

If you’re absolutely sure you want to save as cash rather than invest, that’s your choice. But your investment account is not the place to keep your cash. Instead, put it into a high-yield savings account or checking account. You still won’t outpace inflation at the current rate, but at least you won’t lose as much value because of it.

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