Having an investment is one of the best ways for anyone to make a lot of money and save up for their retirement. It enables you to reduce the possibility of running out of cash at the important times when you will need them. Aside from covering for your retirement, another reason why people go into investment is to cash in of ROI (return on investment), which no doubt helps you meet your long or short term financial goals, like buying a house, a car, perhaps starting a business, or even sending your kids or yourself through college. These are all possible just by investing.
However, a popular misbelieve among the majority of people when they think about investing in ETFs and stocks and bonds is that they regard such lines of business as the ones made for only the rich people in the society. That may be true from a long – long time ago, but if current trends are anything to go by, investment has shown to have transitioned to become something anyone can go into with very little amount and do very well regardless of whether or not that person is super-rich. Technology and innovations have also aided in changing everything in the investment industry, making the processes – from signing up to buying funds to trading and unloading them – become easy that even as a newbie you can start well with just at a push of your internet-powered smartphone.
Today, there are so many platforms offering investment opportunities that support individuals who are in the beginner category. Some of the characteristics they offer that may attract newcomers to try them out include; low-cost requirements for acquiring a fund, slashed fees and commissions, and a website or platform that is easy to use – easy to navigate. With such offerings, a beginner or someone new to investing can perform well, and that is the purpose for writing this article; to help you who are just getting started to find your way in it and prosper, just like your investor role models.
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Investing As Defined For The Beginner
Warren Buffet will have effectively cut out the difficulties in the term investing after he defined it as a process of putting in money and expecting more money at a later date.
Still, to break it down perhaps in its simplest sense, we choose to see investing as an act that involves you taking a part of your money and putting them on a separate business for a chance to earn more on them, while you are at the same time busy working your main job. Learning the ropes on all things investing can be a sure way for an individual to rake in a lot of money and settle their financial problems, and this possibility is becoming very attainable with every passing day. Good investing puts a smile on the face of the investor and provides them with a joyous ending.
How Important is Investment?
Learning to invest has proven to be very paramount to people’s dreams of becoming financially independent and free from loans and other encumbrances. One well-known social truth and agreement among working-class people who work salaried jobs, especially those working 9 to 5, is how impossible it is to survive merely on such jobs. For every person who is of responsibility age, there are bills to pay, house to be bought, and many other dreams to be made a reality, and good investing practice is one of the few ways to attain all of that, not one’s salaried job.
Through investing, the individual can brush off the perils of inflation by availing them the opportunity to own and transfer funds into the future and be able to equally have the means for goods and services even at a later date when they have gone high in the market. Ability to the compound is another leverage that investing can offer the individual. Compounding is simply the process whereby people make a profit by allowing their money to do the work for them, and it typically takes shape when an investor continually recycles his ROI (Return On Investment) to earn extra returns.
What You Should Consider Before Going Into Investing
For everyone, most especially beginners or those who are interested in investing, are a plethora of important considerations to bear in mind before opening an investment account or buying your first share.
1. Consider Your Investment Goals
Considering your investment goals should be one of the first things that crawl into your mind when you have a growing interest in investing. Investment goals can take different shapes for different people and diverse reasons. Goals could be short-term, or long-term but whichever it is, they ultimately resonate and reflect with the visions and expectations of the person. For example, saving up for retirement entails a long-term investment goal, while daily trading for ROI may serve as a short-term commitment.
2. Consider Your Time
Time is another important factor you must consider when getting into investing full time. Knowing the amount of your time to invest in the business goes a long way to set your investment goals going forward. Maybe you are the very busy type who works a job and barely has enough time to look into other businesses, or you are the type that has complete control of your minutes and can put in a few hours, maybe several, into other businesses. The good thing is, with investing, there is an opportunity for you if you fall in any of such time categories, however, the more time you can afford to put in the investing business, the more the likelihood of you reaping a bigger benefit.
3. Consider Your Tolerance For Risk
Make no mistake to think that investing is one of the “get-rich-quick” businesses that require no risks. On the contrary, all types of investments have certain kinds of risks relative to their structure, with some being as high, and others coming as low – depending on your preference or what works for you. Generally, the more deep or advanced you go into investing, the bigger the risk you get exposed to, however, for the beginner, it is best to always start with Investment types that come with low risks of which you can tolerate, and then work your way up from there.
4. Consider Diversifying Your Funds
In investing, the ability to diversify your funds is an excellent feature that can be positively exploited by beginner investors. Diversification of funds simply means not putting all your monies in one single basket, hence, spreading them across several investments – like stock, bonds, ETFs, or other kinds of investment commodities. What this helps the beginner investor with is that it works to reduce the number of risks they take, so that even when one of the investments closes down or has an issue, they are unaffected and can still be able to remain in business thanks to other performances of their other investments.
What Type Of Investment Is Suitable For A Beginner?
There are many types of investments that support beginners and their features and requirements are very friendly and able to be undertaken by anyone irrespective of whether they are rich or just hanging on. Some of the most important ones will be briefly discussed.
1. Exchange-Traded Funds (ETFs)
If you are just getting started or are curious about investing, ETFs are a very good option to try your hands-on, and this is because they are relatively cheaper to afford, and can be done completely passive to suit your constraint for time. In general, ETFs are funds that can be traded on the exchange market daily, just like a normal stock, meaning you can buy or sell them and make a profit any time you want. However, when going into ETFs investing, the beginner should expect to pay small charges in fees and commissions, and this is because they are traded daily like stock. But these days, it has become even better for ETF investors as a lot of brokers now offer very reduced fees with no trading charges, so it’s also a piece of good news to look forward to for the newbies. All in all, nothing is stopping the beginner investor from taking advantage of this opportunity which monitors the market index and predicts their performance for a profit.
2. Investment Apps
Investment apps are another platform that offers the newcomer better and easy access to kickstart their investing business. There are many investment apps in the market offering competitive features to investors. One of such investment apps is Stash. What Stash does is teach investing newbies how to start investing in individual stocks and ETFs among others so you are well-informed enough to build your portfolio. They can also help you manage the same, depending on what you want, and how much money and time you can afford. Stash Investment app is typically the go-to Investment app if you are just starting and need an easy-to-use platform with lots of support.
3. Employer Retirement Plan
The employer retirement plan, widely known as the 401(K), is one very common investment options people consider because it is in sync with your company, can be connected to your weekly or monthly paycheck, and is generally considered the safest and most trustworthy. It gets even better when, for instance, your company happens to match a share of your contributions, meaning you now have some guaranteed, free funds as your ROI. In terms of the amount you need to get started on the employer retirement plan (or 401(k)), although you might be contributing up to somewhere around 20 000 dollars if you’re less than 50 years of age, or 25 to 26 000 dollars if you are more than 50, there are usually no fixed number of funds to put in, but just depends on what you can afford. This is why this package is very interesting and a viable option for beginners as they can opt to begin investing with as a percent of their entire paycheck per payday.
A Robo-advisor is completely an automated beginner-styled investment option that utilizes computer algorithms to help you manage your investment portfolios across the board. One of the good news with this type of investing is that it charges fees of around 0.25 percent to 0.50 percent equivalent of your annual account balance. Compared to what real human investment managers charge, this is considerably low, as it also offers you the liberty of signing up for an account with no actual minimum. As the name sounds, this Investment opportunity is completely computer-driven and does all the heavy lifting for you so that you only pay a small commission for the services offered to you.
How Much Should I Have Before Investing?
Whether you are a little tight on cash or you are a beginner at investing, it may interest you to know that investing in ETFs, 401(k), investment apps, or other types could typically cost you less than you’re thinking would. This is because a lot of these Investment companies and platforms these days are redefining the industry and what it takes to be a part of it. Thus, investing has been reduced to what anyone can go into and earn with the right practices, with factors such as signup and management fees and commissions reduced, while other aspects such as trading costs have become completely free (for some companies offering the investment opportunity).
When Is The Right Time To Start Investing?
It is mostly always advisable to start investing as early as possible, with as small as you possibly can afford for the time being. It is said that investing early gives you a sort of advantage, yet even at that, for you to start reaping the full benefits of your investment being a beginner, you would have to be patient because it takes time for your funds to mature and start to gain. The beginner must always have in mind that, although it takes to take for funds to fully nature to yield, there is no guarantee whatsoever that they will profit at any specific time as this is only influenced by the performance of their funds. So, there is always an existence of risks in the business, however, diversification can help the beginner reduce risks occurrences.
Annuity.org. “Investing For Beginners.” https://www.annuity.org/financial-literacy/investing-for-beginners/
Nerd Wallet. “Investment For Beginners.” https://www.nerdwallet.com/article/investing/investments-for-beginners
Investopedia. “How to Start Investing in Stocks: A Beginner’s Guide.”