Do you want to start investing money, but you don’t have any idea where to start? Let’s make your New Year’s Resolution a reality as we’ve compiled a simple and easy-to-follow guide on how to grow and protect your money.
Who can Invest?
Being an investor is not much of a challenge, but succeeding is a completely different thing. Anyone can invest. As long as you are at least 18 years of age and you have money, you can start investing.
You should also know that it is never too late to invest. If you are already in your 50s and you only realized the benefits of investing, you still have time. There are investments that would show significant results in just a few months so it doesn’t matter if you are already too old or too young. You can start investing any time you want.
If you want to start investing, but you don’t have the money yet, you can get a personal loan for fair credit and use it. There are so many ways to get started so you don’t have to think twice. Even if you don’t have a good educational background or you are currently full of debt, you are still eligible to make an investment.
Why Should You Invest?
It’s pretty hard to decide if you have zero knowledge about what you are getting into. No one would take a chance if they don’t know what benefits they would get from something. It is the same as investing. You won’t be inspired to make an investment simply because your friends are doing it and they are telling you that you would earn from it.
Let’s have a closer look at the benefits that you can get by investing.
1. Grow your Wealth
The most obvious reason to invest your money is to earn more. If you are looking at stocks, bonds, or certificates of deposits, you can expect a return on your investment after a few years. Eventually, your money will compound and you can start earning on money that you have earned already.
However, you have to remember that growing your wealth through investment does not happen overnight. It would take time for you to get a return on investment and to actually start earning.
2. Prepare for Your Retirement
It’s never too early to prepare for retirement. Thinking about the future is not a bad thing and you will eventually get there so why would you hesitate?
Instead of just letting your savings rot in the bank, you can put them into different investments like bonds, mutual funds, stocks, real estate, and more. When you reach your retirement age, you will have enough funds to live comfortably through the money that you earned from them. The best time to start preparing your investment is NOW. You should start planning your retirement plan while you are still young..
3. Compound Interest
Have you watched the 2010 movie “Inception”? It’s a dream within a dream. When it comes to investing, it is earning money within the money you earned. Basically, you make money and the money you made will make you more money and the cycle continues – this is compound interest.
Let’s say you invested $10,000 within the year and you earn about 10% on the money that you invested. You will make $1,000 on the original investment so you will end up with $11,000.
Even if you don’t invest more money after that, the money you made will still make more money. If you let the $11,000 investment roll, you will earn $1,100, which is $100 higher than the previous one. The cycle will continue and you won’t even notice that you already earned so much money.
Even if you only do it once and don’t add more, you can still earn a lot of money through compound interests, especially if you start early. The more time you have, the bigger the gains you get.
4. You can Afford to Make Mistakes
What is the first thing that comes to your mind if you are investing for the first time? It is the fear of making mistakes. No one gets it right the first time. Thomas Edison failed 10,000 times before he eventually perfected his incandescent electric light bulb. If you are scared to make a few mistakes, what would happen to you in the future?
We are talking about money, but when you are still young and you want to try investing, you can still afford to make a few mistakes. You can still do trial and error and you won’t lose a lot as you still have a lot of time to get everything back.
5. Accomplish your Financial Goals
By investing, you can achieve your financial goals faster. If you already received a return on investment, you can then use them for some of your main financial goals like buying a new house, car or starting your own business. You can even use them for the education of your children in the future.
All of these can be bought by saving money, but you can get it faster if you will start investing.
How Do You Start Investing?
Now that you’ve finally decided to invest, how do you get started? We will just give you a few simple tips on how to start your investment career.
1. Decide on the Amount to Invest
Before you start investing, you need to decide on the amount that you can afford to invest. Even if you plan to invest, you cannot simply use all the money that you have for investing. You can start small and see how it plays out.
You don’t need a large amount of money to invest. If you have $100 in your account, you can start with that.
If you are planning for your retirement, get a 401(k) that can offer matching dollars. As long as you contribute enough to the account and earn the full match, that’s free money already so you don’t want to miss out on this.
2. Do your Research
Before you start investing, you should at least do a little research about investing. You need to know the different types of investments that you can try and try to search for answers.
You can also ask around if you have friends or relatives who are already doing investments. This can help you get started as they already know what to do.
3. Investment Options
There are so many investment options available for you and should know each of them along with their benefits.
- Mutual Funds
- Savings Account
- Index Funds
If you want to know more about these investment options, continue reading as we would elaborate on these topics below.
Where Should You Invest your Money?
To fully understand which type of investment is right for you, we will list down some of the best investments that you can try.
This is one of the most popular types of investment because it is also the easiest. A stock is considered as an investment in your chosen company. When you buy a stock from a certain company, you will own a small part of the company and you can get a share on their earnings and assets.
Most of the companies around the globe sell their shares to get money and more capital for their business. Investors can buy these shares and they can also sell them.
So how can you earn money from this? A stock investor can make money when the value of the stock rises. They can sell the stocks that they own and get a profit. You can buy the stocks when the prices are low and you can sell them when the prices are high.
There are also stocks that would pay dividends. This is the regular distribution of the profits of the company to all the people who own shares in their company.
A bond is a type of loan that you provide the government or a specific company. The government usually needs money to fund its projects and companies would require capital to buy properties and equipment.
By purchasing a bond, you will allow the issuer to borrow the money and you will be paid with interest. It is safer than stocks, but the returns are lower.
You can make money by investing in bonds through a fixed-income investment. The investors would expect regular payments so the income would come from the interest. It is usually paid once or twice per annum and the principal amount will be paid on the maturity date of the bond.
3. Mutual Funds
If you don’t want to pick the bonds and stocks to invest in, you do not have to do it. You can just invest in mutual funds and you can start earning.
If you are going to consider mutual funds, the investors can buy a large number of investments then a professional manager will be hired to handle the investment. It will be invested in stocks, bonds or any other assets.
Basically, you earn money through stock dividends as well as bond interests. It is pretty much the same with stocks and bonds, but the only thing here is that you are not the one choosing the stocks or bonds.
4. Savings Account
Many people are asking how to invest money. They usually say that they already have money in their savings account and they don’t know how to use it for investment.
If you have a savings account, you are already making an investment. This is the simplest and easiest investment that you can make. However, the returns are very low and you can say that it is non-existent. However, your money is still increasing if you leave it in a savings account so it is still considered as an investment.
5. Index Funds
Index funds are pretty much the same with mutual funds, but you are not going to hire a manager to handle the investments. It will just passively track an index and mirror its performance. You can earn money from index funds through stock dividends and bond interests as well.
Investing early provides a wide range of benefits to you. Time is your best friend so if you can start investing now, you will surely harvest the benefits in the near future.
When you are investing, you are also taking risks. The greater the risk, the higher the gains.