Investment for beginners

In simple terms, investing is the act of trading in your money to gain more money back at a future date. When you hear the term investing, you might automatically think about the stock market. However, you can also invest in your home, your business, or your retirement. Essentially, all the assets that you own can be viewed as a part of your portfolio.

If you’re looking to invest and you’re not sure where to begin, start off by considering these twelve financially savvy ideas.

  1. Robo Advisors

A robo advisor is a digital platform which offers investment opportunities and a financial planning service. The service is powered by algorithms with no human input. A robo-advisor gathers info from clients to gain a clear picture of their financial situation and their goals. The robo-advisor then uses the data to automatically invest assets, or offer advice. The benefits of these platforms include extensive education, low set up costs, customer service, portfolio management and security. Robo advisors do not come with strict minimum investment requirements, so it’s easy to get started even if you don’t have much to invest.

  1. Investment Applications

Investment apps are a great place to get beginners started; one of the most popular investment apps is Acorns. Acorns is popular because it’s inexpensive to get started and simple to make small investments. Using this application, you can make smarter financial decisions, investing a little bit of money from each paycheck. You can learn all about the investment world with plenty of financial content, customized to your interests. Perhaps one of your goals is to save for your retirement? Using ‘Acorns Later’ you can set yourself up an IRA and get planning for your future.

  1. Balanced Funds

Balanced Funds are mutual funds which consist of a bond element, a stock element, and (often) a money market. All of these components exist within one portfolio. These funds are balanced between debt and equity, and the goal lies between both income and growth. Balanced mutual funds are perfect for investors who are looking for a combination of capital appreciation, safety and income. Balanced funds involve investing across various different assets, usually combining medium-risk or low-risk bonds and stocks. The pros of balanced funds include low volatility, low risk, and a diverse portfolio.

  1. Index Funds

An index fund refers to a type of ET fund or mutual fund. These funds use a portfolio designed to track (or match) the elements of a market index. For example, an index fund might monitor the components of the S&P 500. Index funds are beneficial to gain low operating costs, good market exposure, and a low turnover. No matter the condition of the markets, index funds adhere to their benchmark index. 

Index funds use a passive investment approach, monitoring market index as opposed to relying on portfolio management. Due to this, index funds are a viable stepping stone for investment beginners. These funds are often used as key portfolio holdings for 401(k) accounts or retirement accounts.

  1. Invest in gold

Looking to learn about the ins and outs of gold investment? Let’s consider how to buy gold and what your options are. 

There are a few different ways to get into the gold market. It all depends if you’re looking to buy gold (physically), or to purchase gold stocks (whereby you don’t actually ever see/touch the gold)! For the former option, you might look into buying minted coins or gold rounds. Gold stocks can be purchased through various means including mutual funds, or mining stocks. There are many reasons that individuals invest in gold. Firstly, as inflation goes up, currency values decrease. For this reason, many people like to hold some of their money in gold form. Secondly, investing in gold stocks is another excellent way to diversify your portfolio.

6. Roth IRAs

An IRA stands for an individual retirement account. These particular accounts permit tax-free withdrawals (so long as you adhere to certain conditions). The account was first named after William Roth, one of the former Senators of Delaware. The main difference between a regular IRA and a Roth IRA is that they are taxed in different ways. The Roth IRA is funded with post-tax money, including non-tax-deductible contributions. The moment that you’ve started taking out your funds, the money becomes tax-free. On the other hand, regular IRAs use pretax dollars, and you can expect a tax deduction on what you put in.

Real Estate

Real estate is a popular way to invest and see an excellent ROI. Property flipping means purchasing a property at a low price, refurbishing the building, and then selling it on to make a profit. As you can imagine, you need a significant amount of money to invest, and you need to understand the property market (or be willing to learn). For those who have the resources and knowledge, property flipping can gain a large ROI in a short space of time.

8. Peer-To-Peer Lending

Peer-to-peer lending is a system which allows individuals to offer loans to members of the public; no other financial authority is involved in the process. You might also have heard P2P lending referred to as ‘social lending’ or ‘crowdlending’. As a P2P lender, it’s possible to build yourself a portfolio using small loans. You can expect to earn about 10% on your returns when you lend to individuals and small companies. A few of the most popular peer-to-peer lending schemes include Lending Club, Prosper and Funding Circle.

  1. 401(K)

Perhaps you already have a 401(k) with your current company? In this case, using this account is a great way to start investing. In most cases, your company will match a certain amount of the contributions that you put in. There’s usually no investment minimum, and you’ll see a generous ROI for free if you put in enough money. When you decide to contribute to a 401(k), your contributions will automatically go into your account. Generally, 401(k) payments are made before tax.

10. Day Trading

Day trading is a type of share trading where an individual buys and sells online, within the space of one day. The concept is to earn money due to price fluctuations. Usually, the price movements are small, occurring in highly liquid stocks or currencies. There are various different strategies which you can use to approach day-trading, including swing trading, neutral market trading, or momentum trading. Shares are generally purchased for small amounts of money, so day-trading can be an excellent way for beginners to learn the ropes.

11. Cryptocurrencies

Cryptocurrency is a digital currency, based on a technology called blockchain. These digital currencies resist government input as central authorities do not rule them. Cryptocurrencies systems allow secure payments with digital tokens. There are many different types of cryptocurrency available, and Bitcoin is the most popular. One of the main reasons that people invest in cryptocurrency is because these investments have the potential for high returns. Investing in cryptocurrency is a simple process; you don’t need to visit financial institutions or fill in lots of paperwork. Simply read up on a few  tips for cryptocurrency beginners, and you are good to go!

  1. Mutual Funds

A mutual fund is a lump sum of money from various different investors; the money is there to invest in bonds, stocks or other assets. A mutual fund is operated by a money manager who allocates the assets to produce income or capital gains. The portfolio is designed to complement the investment goals stated in the initial prospectus. With a mutual fund, small investors can access managed portfolios at a low cost.

Investment tips for beginners

  1. Savings percentage: If your portfolio declines, try not to become discouraged. It’s natural for the stock market to decline. Try not to focus solely on the performance of your portfolio, instead consider your savings percentage. If you want to succeed long-term, it’s important to stay invested and save as much as you can. Investment performances are often out of your control; however, you are in control of the savings you make.
  2. Set clear goals: When you’re starting out with investments, it’s essential to define your goals. It’s helpful to allocate time-frames and budgets to each goal; doing so will help you to stay on track. No matter what goals you have, you should review your progress ongoing. Applications such as ‘Goals On Track’ or ‘Way of Life’ can be useful to set yourself short-term and long-term goals. When you set goals it’s more likely that you’ll look after your investments.
  3. Use automation: It’s useful to automate the processes of your investments, to save you time and make things easier. You can do this by setting up auto investments, retirement contributions, and automatic investments on a monthly basis. Investing can be as passive or as active as you want it to be; it all just depends on your approach.

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