Growing Your Nest Egg

Whether you're new to the savings game, are looking to expand a small fortune or somewhere in between, nurturing your nest egg can be tricky yet rewarding. Learn how to get—and stay—on the right track.

Lay a solid foundation
Before you focus too heavily on growing your money, make sure you're on solid financial ground.

• Banish high-interest debt. Some debt—such as a mortgage or car loan—is manageable for most people. But think about paying down high-interest debt, such as credit card debt, before you throw your financial resources into growing your nest egg.
  
  Why? Chances are, the interest rate on this debt is higher than the rate of return you can expect from investing. If you invest before you pay down the debt, you may ultimately come out behind.
  
  
• Establish an emergency fund. If your situation is typical, you probably want a reserve fund that could pay all your expenses for three or more months should you temporarily be without income.
  
  Your emergency fund doesn't have to be in cash—you may have it in low-risk, liquid investments.
  
  
• Get insured. A serious accident, lengthy illness or major home repair could be disastrous to your financial health if you aren't prepared. Make sure your family always has appropriate health, car, life and homeowner's or renter's insurance. Even if you have life insurance at work, consider protecting your loved ones by getting your own life insurance policy.

Get ready to invest
One of the best ways to grow a nest egg can be a regular investing plan. Investing (versus simply saving) can provide potential returns that help your money outpace inflation. Investing can also help you benefit from compounding.

Think about putting aside a set amount of money each month for a regular investing plan. You may decide to set aside a specific dollar amount or a certain percentage of your paycheck each month.

Investing the same dollar amount at a regular interval, such as investing $200 once a month, is called dollar cost averaging.

Our Budget Calculator can help you budget a smart amount for your regular investing plan.


Rapid growth or slow and steady?
What kinds of investments should you choose? Some people aim to rapidly grow their money, and are willing to take a considerable amount of risk for that chance. Others prefer a slow, low-risk approach.

To figure out what approach is right for you, consider:

• Your tolerance for risk. All investments carry some risk, but investments with the potential for the biggest returns (the potential to make the most money) tend to come with the highest risk of losses, too.
  
  Our Risk Assessment Tool can help you figure out how much risk you might be comfortable with.
  
  
• Your investment goals and timeline. What are you hoping to do with your nest egg? If you're investing for distant goals—such as a far-off retirement or college education—you may want to be more aggressive and pick higher-risk investments, as you'll have time to recover from any temporary setbacks or dips in the market.
  
  If you have more immediate needs for your nest egg, you probably want to stick to more conservative, lower-risk investments.
  
  And if you haVe a variety of different goals—regular travel, buying a bigger house, taking classes, retiring one day—your strategy may involve a variety of investments with different levels of risk.

Allocate your assets
Asset allocation is a very important piece in an investment portfolio. Rather than placing all your money in one type of investment, you allot a certain percentage to each major asset class: stocks, bonds and cash equivalents (such as money market funds). If you prefer to invest in mutual funds, you can cover all three classes by investing in different mutual funds that concentrate in the different asset classes. You may also choose to allocate a percentage of your portfolio to other types of assets, such as real estate.

The right asset allocation for you depends on personal factors—such as your goals, your comfort with risk and how much money you have to invest. Finding the right balance can be difficult, but an investment professional can help you. Investment professionals can identify your risk tolerance and goals and help you select investments that are suitable for you.


Getting a boost
A lump sum—from an inheritance, for example—can give your nest egg a real boost. But be careful how you invest it. Even if you start your nest egg with a lump sum, still consider investing a set amount on a regular basis. Even if it's only a small amount, invested wisely and regularly, it can make a big difference in growing your nest egg.


Ask for help
Whether you're a novice or advanced investor, an investment professional can help you get and stay on the right track to building your nest egg.

To schedule a free consultation, find an investment professional at a WaMu financial center near you.

Keep in mind that dollar cost averaging, asset allocation and diversification doesn't assure a profit or protect against loss. Investors should weigh their ability to sustain investments during periods of market downturns.