Everything you need to know on how your money can make money online. You will discover the best investing oppotunities for entry level investors. Why should you start investing, what types of investments are available, how to prepare a good foundation, set your goals, manage risks, and many more in our step-by-step guide for beginner investing.
How To Start Investing With A Hands-Free Approach As A Beginner
Some years back, investing was reserved for a few with deep pockets and extra money to spend. These days investing is an essential component if you want to live a successful life in the future. Beginner investing has very few barriers to entry today as even $100 is enough to get you started.
So, why should you start investing?
The main reason why people invest is because it’s the best way to grow wealth. Through investing, the power of compounding gets unleashed and the money you invest over time snowballs to huge amounts.
Types of Investments
There are several types of investments people use in growing their wealth.
1: Stocks
Stocks are the most popular type of investing that has been in use for more than a century. Stocks are shares of a company. People buy and hold stocks of favorable companies and sell stocks of losing and collapsing companies.
Since stocks are tied to individual companies, your success is dependent on choosing the best stocks that promise a positive outlook over the long term. Stocks have proven to be the most rewarding assets for growing wealth due to the high returns on capital.
As a tip to beginner investing, never trade penny stocks. Chances to be the next Tim Skykes are always 1:10,000. All against you.
2: Bonds
Bonds are considered safe as they appreciate with specific rates of interest. Government bonds and treasury bills are popular examples of bonds. If interest rates increase, the prices of existing bonds fall. Bonds have low risk but so is their rewards. Bonds are one of the safest investments for beginners are they carry low risks.
3: Real Estate
In real estate, investors generate profits through two main ways.
1) By developing buildings then selling them for profits.
2) Allowing others to rent or lease from you.
Buildings can be apartments, homes, retail shops, and offices, etc.
While real estate has attractive rates of returns, it has higher risks and requires large amounts of capital compared to other types of investments.
Good investments for beginners
To most beginners, getting started is daunting as they wonder where to start and question if they’re really committed to managing their accounts regularly. The good thing is in recent times, there are even hand free approaches to investing.
1: 401K
401Ks are employee retirement plans where once you sign for them, a certain percentage is deducted from your paycheck every month directly to your 401K account. The percentage can be as little as 1% although a modest 6% is more acceptable to get substantial returns.
2: Index funds
Index funds are mutual funds on autopilot. They track the movement of top indexes such as the S&P 500. They take a passive approach to investing and also require minimum capital while also keeping their expense ratio low.
3: Robo Advisors
Unlike human advisors, robo advisors are always available anytime to offer you investment advice if you wish.
Robo advisors also offer a lesser fee for managing your account. These automated computer systems charge 0.25% to 0.50% on annual fee compared to 1 to 2% offered by human financial advisors.
While all these are great ways to investing for beginners, never get completely hands free from your account. Check in occasionally to track progress especially with the robo advisors.
Investing For Dummies 101: Short term vs long term investing?
Whether to take an active or passive strategy to investing or if you should focus on long term or short term, it’s all upon your discretion. Investing is all about growing wealth so long term passive strategy is always best. Before investing, always have some money saved for emergencies to avoid using the money you’re investing for your short term needs.