There’s no reason you shouldn’t learn to invest. No matter how much money you start out with, everyone has to start somewhere. Just because you don’t have a lot to invest with, doesn’t mean investing won’t be well worth your time (and money). In fact, seasoned investor and billionaire, Warren Buffet, began investing with just a couple hundred dollars. So there’s no reason that you shouldn’t learn the how to invest too!
Investing is all about setting realistic goals and executing a plan to help you reach those investment goals. In order to do so, you’ll need to know the basics on investing. You’ll also need to the risks associated with investing.
These tips on investing will help you understand the basics of becoming a first-time investor so that you can make the best possible investment decisions.
Know the Risk
The most important thing to know about investing is that it comes with a risk. The greater the potential reward, the greater the possible risk.
You also need to be aware of your risk tolerance before investing. Some people can handle loss better than others. Be aware of how well you tolerate the risk of losing money—even in the short run. Doing so will help you develop the right portfolio.
Different Types of Investments
Once you’ve determined your risk tolerance, you can begin looking into different types of investments. Here are the five main investments you should consider:
- Stocks- A stock is a share of ownership in companies. This is one of the most popular methods of investing. Stocks allow you to invest in popular businesses and products in the economy. This is known as a high-risk, high-reward investment. If you want to invest in stocks, open a stock brokerage account.
- Bonds- Bonds are debt securities issued by corporations or governments. They come with a fixed interest rate and a guaranteed return once the bond has aged.
- Mutual Funds- A mutual fund is an investment pool that holds stock, bonds or both. Mutual funds invest in securities (bonds, stocks, short-term debt) and can have fees as high as 3%.
- Real Estate- Real estate is a great way to add equity diversification to a portfolio with stocks. With real estate there is potential to generate income and long-term capital appreciation. The problem to invest in real estate you’ll already need a good amount of investment capital to buy individual properties. Though there are ways to work around this if you are investing as a beginner. One way to do so is crowdfunding.
You can use any of these options to diversify your portfolio. Diversifying your portfolio will help you reduce any harsh risks. It can also improve your overall return. Think of it this way: Don’t put all your eggs in one basket!
It’s also important to add some stable investments—low risk options that will help you plan for retirement. There are long-term investment options, such as a 401(k) or a Roth IRA account. These are low-risk ways to invest in your future/retirement.
Establish a Plan
The most important thing when investing as a beginner is to establish a plan. Talk to an expert so you can figure out what your investment goals are. This will allow you to make the best possible investment decisions for your future.
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