All You Need to Know About Investing

Greg Welborn
May 1, 2018
Investing

Investing is a great way to increase your net worth and reach your financial goals. However, there are numerous risks involved with investing in the stock market that many people tend to overlook. We hear about the successful investors – Peter Lynch, Warren Buffett, etc – and about the scammers, we need to avoid – think Bernie Madoff – but very few people understand what actually makes the successful investor successful. Below are several key ingredients which can improve any investor’s performance.

Focus on What You Can Control

There are many factors which influence the performance of your investments. Whether it is market volatility, economic events, politics, interest rates, or natural disasters, you can bet that you will probably have to deal with at least some of these in the course of your investing life. You can’t predict these; you can’t control these factors. But you can control how you react to these factors.

Let Time Work For You

Time is your greatest ally. You can’t control time, of course, but you can decide that you’re a long-term investor because you know that the value of compounding returns over time is one of the most powerful ways to build wealth. The history of the markets over several hundred years is almost irrefutable evidence of this simple truth. Even Albert Einstein once commented that “compound interest is the eighth wonder of the world”. Give your investment portfolio enough time to be successful.

Tune Out the Noise

The popular press should never be a primary source for investment data or the basis of any decision-making. Papers, magazines, television and radio shows are flooded with headlines designed to spark anxiety, shock and/or titillate. The articles and commentaries are rarely meant to provide the unvarnished truth, let alone detailed, accurate analysis. The information you need will require some digging and dedication. It’s out there, but it’s often lost amongst all the white noise clamoring for your attention. Knowing what’s truly important is a learned skill. People aren’t born with it. If you don’t want to learn how to do this, then hire a professional who does.

Avoid “Secret” Investing Formulas And Don’t Try To Time The Markets

Television, radio and the papers regularly feature advertisers claiming to have a new secret investment formula, or to have advance certain knowledge of the next market upswing or downturn. Nobody on any of the various lists of the richest people in the world is on that list because of a secret investment formula or from success in timing the market. Furthermore, nobody on those lists even knows someone who has successfully timed the markets. One research study demonstrated that during a 10-year period of time investing if you mistimed the market just 4% of the time, you’d have earned less than treasury bonds but wouldn’t have eliminated any of the risks.

Understand The Risks Involved With Investing

When people think of investment risk, they often associate this with the possibility of their portfolio losing money. However, there are many other forms of risk which are just as critical: inflation, longer lifespans, and the rising cost of healthcare can all decimate your portfolio. Most people underestimate how long they will need to rely on their investments and under-estimate how much they will have to withdraw to live over this long period of time. If you do not have a portfolio structure which balances all risks, your financial plan is built on shifting sand.

Accept The Emotional Roller Coaster

Emotional decision-making can wreak havoc on your investment portfolio. As much as we all think we’re rational, intelligent investors, every one of us is still subject to our emotions, and they can be more powerful than we realize.

A study by Morningstar showed that over a 10-year period the average return of all the stock mutual funds was about 10% per year. Can you guess what the average return was of the average investor in these stock mutual funds? 10%, 8%, 4%??

The answer is negative 2% per year. That’s right. While the average return for the funds was 10% per year, the actual experience of the investors in those funds was a loss of 2% per year. Why? Because they typically bought when prices were rising (greed), sold when prices were falling (fear), and repeated that habit over all 10 years. Buying high and selling low has never been a successful strategy, but it is a very emotionally fulfilling one. That’s why you need to accept the roller coaster without making decisions based on each rise and fall. Investing for the long-run is key in becoming a successful investor.

Savings are King When Investing for Your Future

Very few people have become successful due to a one-time financial windfall or inheritance. Even people who get that bonus, win some prize or receive a substantial inheritance find that they still need to consistently build their nest eggs. Regularly contributing to your investment portfolio provides the seeds and nutrients necessary for real growth. You must save regularly during your life. The only way to do that is to spend less than you make. It’s not rocket science, as they say, but it is powerful.

Don’t be Afraid to Ask for Help

Nobody knows everything. We all have our limitations. The important thing is to know what you don’t know. If you’re not good at carpentry, hire a carpenter. When you’re not a doctor, don’t set your own broken bones. If you’re not a lawyer, don’t represent yourself in court. And if don’t consider yourself a successful investor, please don’t make critical investment decisions without the guidance of an objective and practiced advisor. The advice of a professional financial advisor can go a long way. If you would like help, or even if you just want a second opinion, we are always here to help.

Greg Welborn

A Health Savings Account (HSA) is a tax-advantaged savings account designed to help individuals with high-deductible health plans (HDHPs) pay for qualified medical expenses. What sets HSAs apart is their triple tax advantage: contributions reduce taxable income, earnings grow tax-free, and withdrawals for eligible medical expenses aren’t taxed.

For anyone looking to reduce healthcare costs, save on taxes, and even prepare for retirement, an HSA is a powerful financial tool. Here’s why it matters:

Quick Overview

Tax Benefits: Pre-tax contributions, tax-free growth, and tax-free withdrawals for qualified medical use.
Ownership: The account is yours, even if you change jobs.
No RMDs: No required minimum distributions at any age.
Investment Options: Access to numerouse investment funds and it can be used to invest for long-term growth.
Retirement Use: After 65, funds can be used for non-medical expenses (taxed as income).

Eligibility and Contributions

To qualify for an HSA, you must enroll in a High Deductible Health Plan (HDHP). For 2025, that means a minimum deductible of $1,650 for self-only coverage or $3,300 for family coverage. Being enrolled in other coverage, like Medicare, will disqualify you.

Contributions can come from you, your employer, or even family members, and must be cash (not investments or property).

For Health Savings Account, in 2025, individuals can contribute up to $4,300 and families up to $8,550, with an additional $1,000 catch-up contribution allowed for those 55 and older.

Coverage Type	2024 Limit	2025 Limit	Increase
Individual	$4,150	$4,300	$150
Family	$8,300	$8,550	$250
Catch-Up Contribution (Age 55+)	$1,000	$1,000	No change

Health Savings Account Benefits

HSAs offer unmatched tax perks:

Pre-tax contributions lower your taxable income.
Tax-free growth means the money you invest in your HSA can grow without being taxed each year – so your savings build up faster.
Tax-free withdrawals for qualified medical expenses keep more money in your pocket.

Compared to other accounts like 401(k)s and IRAs, HSAs have no required minimum distributions (RMDs), making them ideal for long-term wealth building. The account is also fully portable – you own it outright even if you change jobs or insurance plans.

Managing Your Account

Maximizing an HSA starts with selecting the right provider – look for low fees, robust investment options, and user-friendly interfaces. Many HSA administrators offer the ability to invest your balance in mutual funds, ETFs, or other vehicles.

Keep thorough records of your contributions, distributions, and receipts. This documentation ensures IRS compliance and preserves your tax advantages. Consider using your HSA debit card for convenience, but always retain proof of qualified expenses.

Using Your HSA

HSA funds can be used for a broad range of medical expenses, including:

Keeping receipts is crucial, especially if you choose to pay out-of-pocket and reimburse yourself later – a strategy that allows your HSA investments to grow tax-free for longer.

Investment Options

HSAs aren’t just for short-term spending – they can serve as investment accounts for long-term financial planning. Investment strategies vary based on your goals:

Investment Strategy	Cash Reserve	Investment Allocation	Best For
Conservative	100% in cash	None	Immediate medical needs
Balanced	Amount equal to annual deductible	30% stocks, 70% bonds	Balancing current and future needs
Growth-Focused	10% in cash	50% stocks, 40% bonds	Long-term retirement planning

Experts recommend keeping at least enough cash to cover your deductible and investing the rest according to your risk tolerance.

What's your risk tolerance? Your tolerance to risk will have a big impact on the types of investments you choose. However, not many people know what their risk tolerance is. Discover your risk tolerance by taking our Risk Tolerance Questionnaire.

Retirement Planning

When used correctly, HSAs can be a strategic retirement planning vehicle. After age 65, funds can be used for non-medical expenses without penalty (though they are taxed as ordinary income). That flexibility makes HSAs a powerful complement to 401(k)s and IRAs.

Consider these retirement-focused strategies:

Cover current healthcare costs out-of-pocket to let your HSA grow.
Max out contributions after funding your 401(k) or IRA.
Use your HSA to pay for Medicare premiums, long-term care, and other out-of-pocket medical costs.

Tax Implications

The tax benefits of HSAs are a cornerstone of their appeal:

Contributions reduce your taxable income.
Growth isn’t taxed as long as it stays in the account.
Distributions for qualified expenses are also tax-free.

However, distributions for non-qualified expenses before age 65 are subject to income tax plus a 20% penalty. After 65, only ordinary income tax applies.

Work with a tax advisor to stay within IRS guidelines and maximize your savings for the best results.

Comparing a Health Savings Account to Other Accounts

HSAs outperform many similar financial vehicles in flexibility and tax efficiency. Here’s how Health Savings Accounts compare to other financial accounts:

Feature	HSA	FSA	401(k)	IRA
Triple Tax Advantage	✅	❌	❌	❌
Withdrawals for Qualified Medical Expenses Are Tax-Free	✅	✅	❌	❌
Funds Roll Over Each Year	✅	❌	✅	✅
Account Is Yours to Keep	✅	❌	✅	✅
No Required Minimum Distributions (RMDs)	✅	❌	❌	❌

Disclaimer: The information presented in this table is for general informational purposes only and is used as a broad comparison tool. Contribution limits, tax rules, and eligibility requirements are subject to change depending on the intricacies of each account type.

Unlike Flexible Spending Accounts (FSAs), HSA funds roll over yearly and belong to you regardless of employment. And unlike 401(k)s or IRAs, you can use HSA funds anytime for qualified medical expenses with no penalties.

Family and Estate Planning

HSAs can be used for qualified medical expenses for your spouse and dependents – even if your HDHP doesn’t cover them. Upon your death, the HSA transfers to a named beneficiary. If that’s your spouse, it remains an HSA; for others, it’s treated as taxable income.

To maximize long-term value:

Set beneficiaries carefully.
Use the account to cover family healthcare expenses and reduce taxable withdrawals.
Include your HSA in your estate planning discussions.

Portability and Flexibility

An HSA travels with you. Change jobs, move states, switch health plans – your HSA stays intact. You can even open multiple HSAs for different strategies (e.g., short-term spending vs. long-term investing).

This flexibility allows you to build a healthcare safety net that evolves with your needs.

Health Care Integration

HSAs are designed to complement HDHPs by reducing your net out-of-pocket costs. They provide a safety buffer against large medical expenses and a way to pay for ongoing healthcare needs like:

Preventive care
Specialist visits
Prescriptions
Mental health services

When used strategically, HSAs help make high-deductible plans more manageable and affordable.

Is an HSA Right for You?

A Health Savings Account is more than just a savings tool – it’s a cornerstone of a smart financial and retirement strategy. With triple tax advantages, investment potential, and unmatched flexibility, HSAs can significantly reduce healthcare costs and support long-term financial goals.

To get the most out of your HSA:

Confirm HDHP eligibility and stay within contribution limits.
Invest your surplus wisely for long-term growth.
Keep meticulous records to protect your tax benefits.
Consider working with a financial advisor to optimize your strategy.

Whether you’re saving for next year’s doctor visits or planning decades in advance for retirement, an HSA belongs in your financial toolkit.

Schedule Your Complimentary Consultation

Meet Greg Welborn

Greg Welborn is a Principal at First Financial Consulting. He has more than 35 years’ experience in providing 100% objective advice, always focusing on the client’s best interests.

Meet Greg Welborn

Greg Welborn is a Principal at First Financial Consulting. He has more than 35 years’ experience in providing 100% objective advice, always focusing on the client’s best interests.

FAQ | Health Savings Account

What is a Health Savings Account (HSA)?

A Health Savings Account (HSA) is a tax-advantaged savings account available to individuals who are enrolled in a High-Deductible Health Plan (HDHP). It allows you to set aside money on a pre-tax basis to pay for qualified medical expenses. Funds in an HSA can be used to cover deductibles, copayments, prescriptions, dental and vision care, and more - all while reducing your taxable income. The account is owned by you, not your employer, and the money rolls over year to year.

Who is eligible to open an HSA?

To qualify for an HSA, you must meet the following criteria:

Be enrolled in a qualified High-Deductible Health Plan (HDHP).
Not be enrolled in any other health insurance coverage (like a spouse’s plan or Medicare).
Not be claimed as a dependent on someone else’s tax return.

For 2025, an HDHP must have a minimum deductible of $1,650 for self-only coverage or $3,300 for family coverage, along with a maximum out-of-pocket limit of $8,300 (individual) or $16,600 (family).

How much can I contribute to an HSA?

The IRS sets annual contribution limits for HSAs, which adjust for inflation. For 2025, individuals can contribute up to $4,300 and families up to $8,550. If you're 55 or older, you can contribute an additional $1,000 as a "catch-up" contribution. These contributions can come from you, your employer, or both combined, but they cannot exceed the annual limit.

What can I use HSA funds for?

HSA funds can be used to pay for a wide range of qualified medical expenses, including doctor visits, prescriptions, vision and dental care, and even some over-the-counter medications. If you use the funds for non-qualified expenses before age 65, you'll pay regular income tax plus a 20% penalty. After age 65, you can use the money for any purpose without a penalty - though non-medical expenses will still be taxed as income.

Can I invest the money in my HSA?

Yes, many HSA providers allow you to invest your HSA funds once your balance reaches a certain threshold, often around $1,000 or $2,000. You can invest in mutual funds, ETFs, and other securities. This gives your HSA the potential to grow significantly over time, especially if you don’t need to tap into it for short-term medical costs.

What happens to my HSA if I change jobs or health insurance?

Your HSA is yours to keep, no matter where you work or what health insurance you have in the future. It's a portable account, meaning you can continue using the funds for qualified medical expenses even if you're no longer enrolled in an HDHP. However, you can only contribute to the HSA while you're actively covered by a qualifying HDHP.

Can I use HSA funds for non-medical expenses?

Yes, you can use your health savings account for non-medical expenses. However, there are conditions you must meet.

If you're under age 65, using HSA funds for non-qualified expenses will result in income tax plus a 20% penalty.

If you're 65 or older, you can withdraw funds for any purpose without penalty - though non-medical expenses are still taxed as regular income (similar to a traditional IRA).

This makes the HSA a potential secondary retirement account for those who stay healthy and don’t use all their medical savings.