Sequence of Investing – Where Should You Invest Your Money At What Time

Sequence of Investing - Where Should You Invest Your Money At What Time

Investing is one of the most important financial decisions any person makes.  It’s a way to provide for your future and allow your assets to work for you and multiply by creating passive income.

In this article, we’ll discuss a correct sequence of investing that will bring in the most profit and mitigate the risks involved as much as possible.  There are plenty of investment options out there, and diversifying a portfolio is key, but not all investors are ready to go for all types of investments at once.

First Things First

 Before investing any money in any sort of funds, it’s important to cover the basics first.  The first step towards financial security is to create an easily accessible fund that will be used for emergencies.  This fund should be put in an account that yields interest but that you can take out as soon as you need it.

After that, the proper way to go about things is to create a broader safety net fund that will cover between three and six months of everyday expenses.  It’s also important to pay off any and all debt other than the one for paying off real estate.  Once you have this covered, it’s time to invest.

First Tier of Investment

The first tier of investment is one that’s known as free money.  We all know that there’s no such thing, but the term is apt.  It refers to the investments that the employer makes in the name of their employees.

Employer-Matched Retirement Funds

 Retirement funds are among the most common and most important investment opportunities.  Employees often offer matching contributions, meaning that the company matches the contribution the employee makes.  The best way to go is to take full advantage of this opportunity and contribute as much as it’s allowed.

For example, if your employer matches 100% of your contributions up to 3% of your income, then make sure you are contributing no less than 3% of your income.

Employee Stock Purchase Plan

Publicly traded companies sometimes offer their employees to purchase company stocks at a discount (it’s usually around 15 percent).  Sometimes, there are restrictions as to when you can sell your stocks – usually based on how long you’re at the company.  In other cases, the employees are allowed to sell the stocks as they please.

It’s important to keep in mind that when you sell the shares, you’ll be taxed on the income made in the process.  If a company offers this option and if you plan to stay with it for a while, it’s a worthwhile effort.

Second Tier Investments

The investors themselves make the second tier of investment, but there’s public and governmental support for such efforts.  The support usually comes in the form of tax relief or low tax policy, as the government tends to support and promote these sorts of investments.

Roth IRA

A Roth IRA is a common tax-efficient investment account.  The contributions made to the account are made on an after-tax basis, meaning that there’s no relief from early on.  However, any growth that comes from the account is tax-free as long as the investor leaves the money in a Roth IRA account for five years or more.

Before using this sort of account, the investor should know if they are eligible for it.  The rules are set up so that the investor (and their spouse) has earned income up to the amount they want to contribute to the investment.  There’s also an upper limit since this form of investment is made for middle-class investors.

Traditional IRA accounts

 Traditional IRA accounts are made to defer the payment of taxes.  The taxes are paid once the investor takes the money out of the IRA account.  The purpose is, therefore, for the investment to earn you enough to outweigh the tax payments.

Most investors use these accounts to separate their long-term savings, on which they won’t pay taxes until they use them, from their day-to-day earnings and expenses.  The money you have set in your IRA account can only be withdrawn when you’re 59 and six months old, so many use it as another retirement option.  If you withdraw the funds before that, there’s an additional tax of ten percent.

529 Education Savings Plan(s)

 This savings plan is also made to relieve tax burdens, but they are built for one specific purpose.  It’s a savings plan created to fund educational expenses.  Most investors set up such a plan as soon as they have kids as a way to prepare for their future.

They work the same as IRA funds, meaning that the growth made from it isn’t taxed as long as you keep the money in the account for at least five years.  529 Education Savings Plans have high contribution limits based on the annual gift exclusion, which is $17,000 in 2023.  With 529 Education Savings Plans, you can make a lump sum contribution of up to $85,000 per person.

Third Tier

 The last tier on our list is about the investments that bring high yields, but there are no tax benefits set for the profits made from them.  The best way to go is to go into these options once you already have the basics set with the accounts we’ve mentioned.

Investing in Crypto

 Cryptocurrencies have been around for a long time now, and it’s proven that they can be used for long-term asset management and investing.  The value of cryptocurrencies changes, and they are known to be volatile in the short term.  However, in the long run, the value keeps growing, which is the quality the investors are looking for.

There’s wide adoption, and it’s easy enough to learn how to buy Bitcoin and use the crypto exchanges.  The simplest way to approach this investment is to simply buy and hold it, and it will also resolve the issues that come from market volatility.

Non-Ira Investment Accounts

 Index Exchange Traded Funds (ETFs) are similar to other investment accounts we mentioned, but the difference is in how the profits made from these accounts are taxed.  There are no tax benefits for investing in ETFs, and investors need to pay a tax rate that is dependent on the amount they’ve profited.

In the last couple of months, ETF funds have started including Bitcoin ETFs. This is a way for investors to invest in crypto but without buying Bitcoin directly.  Instead, they invest in the funds, with value tied to the changes in Bitcoin value.  The introduction of these funds shows that Bitcoin and crypto, in general, are becoming a part of mainstream finance.


 Investing is an important financial tool for an individual or a household and vital for the economy as a whole.  The investors should make sure that they have a safety net planned out and that they don’t have any debt.

The sequence of investment decisions is also of imperative importance.  Most start with the funds that are funded by the matching deposits from their employers.  The next phase is to move on to funds that are not taxed or taxed at a low rate and then to funds for which there are no tax benefits.