How to Start Investing? Top 7 investment options


Most of those who are new to investing, can often become confused with huge amount of investment options and strategies that are available. While the majority of new and even intermediate investors will try to seek for the best investments, they could be missing the most important thing. It is investor education.

No matter how well perform your investment, it is still a gamble if you do not understand the reasons why selected investment performs in such manner.

The other important point is that you should learn how and where to invest only from those, who already made a fortune, not from those who only teaching how to achieve it, while still living solely on salary themselves.

Let’s look at some of the investment options and opportunities newbie investor can use and explore how to start investing with them. Those investment options are considered to be the safest.

1. Retirement Investment – Investing Money in 401K

One of the most important investments people will make is for their retirement. It is crucial to start thinking about retirement investment long before you actually retire.

Making sure you have enough money for retirement is one of the most important investment decisions you can make.  Yet, you can invest for retirement without any knowledge of stocks and bonds.   One of the first things to do is to amp up your 401K.  Put as much as you can into your 401K plan, especially if your employer offers matching funds.   Many employers will match up to 50% of what you invest.  Failure to take advantage of this is essentially walking away from free money!  Make a retirement savings plan and stick to it tenaciously, holding on through market storms and recessions.  Also, never “cash out” of your retirement when you switch from one job to the next.

When it comes to retirement saving and investing for beginners, the key is to start NOW.  With the realities of compound interest, it is possible for a person who invests one-half of what you do to retire with twice as much—all because s/he started early.  Time is money, and the longer you invest and save for your retirement, the better.  You simply must start right now.

2. Bank Savings Account

There are smaller, more simple ways to start earning money for the ones who just starts to uncover how to start investing, without taking large risks in the stock market. One of the easiest investment strategies is to open a simple bank savings account, that holds little risk. Savings accounts are liquid and require minimum balance. This minimum balance depends on bank, sometimes it can be as low as 1$-5$, but in most cases around 100$. Savings account liquidity means, that you can take out your money whenever you want.

You must understand that different banks can pay different yearly dividends. Yearly interest rate of the bank can depend on many factors such as its capital, location and currency of deposit. So if, for example, your local bank offers you a 4% yield in US dollars, do not hurry to put your money. Instead look what other banks can offer you. Do not look only for deposits in US dollars, but pay attention to deposits in other currencies such as Swiss franc or Canadian dollar. Deposits in other currencies sometimes can offer you a higher interest. By making this research you can find great investment opportunities which banks can offer.

3. Certificates of Deposit

Another easy option that bank offers is a purchase of Certificates of Deposit, or CDs. Certificates of deposits are akin to savings accounts for the savvy, they are timed deposits that collect interest for a certain amount of time. The time period could be as short as 3 months or as long as several years. Typically CDs have higher interest earnings than regular savings account and are a great transition into others forms of monetary investments. So it can be a good choice of how to start investing. Certificates of Deposit are also considered as low risk investments, because CDs are usually insured by government.

Businessman Passing Baton to Businessman

4. Real Estate

One vehicle of investment that is largely ignored by investing beginners is real estate investing. No matter the specific real estate market, people will always need a place to work and live. Purchasing different types of real estate, such as apartment homes, small rental homes, and office complexes, is a good way to get a return on investment each month. Beginning by owning a small duplex or small multi family unit may be a good idea, as smaller units are easier to maintain as a landlord, and less tenants equals less responsibility for a new landlord. Monthly rent on real estate investments should be set at more than the monthly mortgage and insurance costs in order to make a profit monthly. Real estate investors should always purchase property they can properly fit in their own budget, as finding renters or purchasers for the property may take several months depending on the market.

5. Treasury Bonds

Treasury bonds is another good asset for investing beginners to get, basically it is a loan to your government. Treasury bonds are also considered as safe investments, because they  are backed by government. However when considering buying treasury bonds, look at their credit rating. Those ratings are issued by credit rating agencies like Moody’s, S&P, Fitch. Grades will vary by agency, though AAA is the highest grade ( meaning that bonds are very safe) and D is the lowest ( actually when government has default). Treasury bonds can be bought through the Treasury Department. You can also check with your bank or your local broker and see if you can get them there. You can buy bonds for as low as $100. Treasury bonds have maturity of 10 years or more. Many people buy them for their children, and have them mature in 10-20 years for college costs.

6. Precious Metals

Another strategy of investing for beginners is to buy gold and silver.  Gold is inviting because it holds its value more than other currencies: it is the only money in the world that has never failed. Converting some of your money to gold has the advantage of being valuable even if the dollar takes a nosedive in value.  When the economy falters, more people buy gold, which helps the individual investor to counter rampant inflation.

There are several ways to invest in gold: coins and bars being very popular.  Investors can store the gold at home if they wish (one cynic said that the government can’t steal something from you if it can’t find it). If you are not comfortable enough to store the gold at your home, there are companies that will hold it for you.  However, many experts advise against this option, saying “always take delivery.”

Gold will always be good currency even in another depression—in fact, the Great Depression of the 1930s teaches the value of gold: remember those pictures of people pushing wheelbarrows full of valueless dollars to get food?  In such a crisis, having some of your money in gold is a great way to protect your wealth.  Many experts are, in fact, predicting a great economic downturn, and buying gold NOW can help you to protect your assets.  These experts say that, if possible, you should buy some gold every month. Buying gold at the right time will not only protect your wealth, but it can also make huge profits.

Silver is second only to oil as the most useful commodity.  Silver has the advantages of being less expensive than gold, but it has much greater practical value with respect to other investments.  In case of catastrophe for the dollar, silver is easier to divide than gold.  As with gold, silver is a good way to prepare for economic downturn and inflation.  Most experts recommend having a mix of silver and gold.  The gold will be for larger amounts of money, such as hundred-dollar bills, while silver would be for lesser amounts, such as twenty-dollar bills.  Another thing going for silver is that it is much-used, which keeps its value up.

7. Invest in What You Know

Peter Lynch and Warren Buffet advise people to invest in what they know, saying that this is more important than technical knowledge of stock and bond analysis, which you can learn fairly quickly and easily.  According to their theories of investing for beginners, even if you have knowledge of stocks and bonds and the way they work, if you are dealing with something that has a lot of unknowns for you, you will be more susceptible to scams.  But, if you only invest in what you know, you will be more likely to hold on to your money.  Not only that, but people following this investment strategy are likely to derive more enjoyment from their investments.

Buffet was famous for following his own advice: during the “dot.com” explosion, he did not enter the fray, even though it was terribly profitable for a while.  He refrained because he was not comfortable with investing in technology.  According to Lynch and Buffet, if you want to invest outside of your “comfort zone,” you should seek expert help. Clearly, investing in what you know is a good investment strategy: it works for Lynch and Buffet, and it is difficult to argue with success.

These are stable investment tools. If you want to invest, but don’t know or unsure how to start investing, try to stick with before mentioned options.

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Comments

  1. Sana Rundell says:

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  2. Gricelda Stentzel says:

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  4. Cherly N. Donaldson says:

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    • The US always olecwmes money. so yes you can do it. either through your bank or you can open an account with a broker. but i don’t know if this is the best scenario for you. depending where you are from. some countries are experiencing a good blooming economies which you might get more return on your money. 5000 dollars isn’t that much to start with adding up the transfer fees and the low return you usually get back from these alternative investments. i don’t think its worth it. but look into it.

  8. Sandy Abella says:

    Thank the author so much for this good post. Great job!

    • Don’t think it is worth the trouble with $ 5000.The enevrue at home might have a problem, ? not the U.S.etc.Also their is a possible currency risk or loss ?? etc.Savings Account, Funds, ETFs are another idea. ok

  9. Stephen Norman says:

    It is really a great and useful piece of information. I am glad that you shared this useful info with us. Please keep us informed like this. Thank you for sharing.

    • A good bond is a good bond regardless of how thinly traded it is. But if you have to read about bonds in Muni Bonds for Dummies, that alone should tell you that these should not be speculative investments for you – meaning you’re buying them in hopes of generating capital gains down the road rather than income. I think you will have more satisfactory results looking for sound issues with a view to holding them to maturity, and enjoying the income in the meantime. (Isn’t Tennessee a no-income-tax state?)Now, if you want to learn about how to dig into these bonds, and how to tell shit from shinola, then I would recommend you going to the library and getting a copy of Benjamin Graham’s Security Analysis, published in 1934, and reading the relevant sections, paying particular attention to anything he says regarding margin of safety and the assurance of return of principal. If you read it, understand it, and LOVE IT, then proceed from there. Hell, chances are you might know more than your broker does, if you do that!I’m sure your income disqualifies you for a Roth, which can also generate tax-free income at retirement.Since you have an Insta-daughter, between you and the Insta-Stud, I’d also consider a decent permanent life insurance policy (you might be uninsurable, having already died, as it were, but Glenn might still be insurable). This would accomplish two things: It would secure the Insta-daughter’s future in the event of God-forbid an Insta-death. And it would also, over time, accumulate cash that you can tap on a tax-advantaged basis, as well, to supplement your income. You can do this down the road by borrowing against the policy (tax free) or by selling the policy for cash to a third party (which brings up a whole other set of issues, but you can do it.)This is not something a do-it-yourselfer should be doing. I encourage you to tap into an expert with some experience. You’re really playing your current tax bracket against a future bracket when you retire, etc., plus insurance planning needs, plus risk management. This is an order of magnitude beyond maxing your IRA and 401k. Ditto the commenter above: I think it’s important that you get professional advice.Listening to Suze Orman or Dave Ramsey doesn’t count.

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    • Yes, you can invest with an American msevntient account, as long as you comply with certain regulations. Here is a direct quote from my broker/dealer: Non-Resident Alien: An individual who is not a citizen and who does not have his permanent (tax) residency in the United States. A nonresident alien is subject to 30% NRA withholding on some types of U.S. income, and he must file a nonresident tax return on that income. The U.S. has tax treaties with many countries allowing a resident of any of these countries to claim reduced rates of withholding. A nonresident alien is required to file an original W-8BEN with the payer or he will be treated as a U.S citizen and be subject to backup withholding according to TEFRA rules. Here is a list of countries that the U.S. has sanctions against, with the date the sanctions were instituted. Residents of these countries may not have an American msevntient account:OFAC Country Sanctions Programs Program Last Updated: Balkans Sanctions 05/22/2006 Belarus Sanctions 02/27/2007 Burma Sanctions 05/22/2006 Cote d’Ivoire (Ivory Coast) 09/19/2006 Cuba Sanctions 05/23/2007 Democractic Republic of the Congo Sanctions 03/30/2007 Iran Sanctions 04/04/2007 Iraq Sanctions 07/21/2005 Former Liberian Regime of Charles Taylor Sanctions 05/23/2007 North Korea Sanctions 02/02/2007 Sudan Sanctions 04/04/2007 Syria Sanctions 08/15/2006 Zimbabwe Sanctions 05/22/2006

  11. Biuro Podrozy says:

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    • I’d like to add a couple of things.When you buy a bond, muni or otherwise, you should be buying it for current income and consider it a buy and hold investment. The value of the bond can vary quite a bit in the near term as new issues come out with higher or lower interest rates. My mother took a pretty hefty loss on some corporate bonds because she didn’t understand this and when the value of the bond went down due to a rise in general rates she sold it. Had she held onto it until maturity, she would have gotten her money back. In other words, she treated it more like a stock investment than a bond investment.Unless you are in a very high tax bracket, munis may not make sense when compared to more widely issued/heavily traded taxable corporate issues. If you are in say, an 18% bracket, for the 4% bond that was cited above, your taxable equivalent yield would only be about 4.87% (coupon rate divided by 1-tax bracket %, e.eg. 4/1-0.18). At the 35% bracket your taxable equivalent yield would be 6.15%, so look at what you can get from a high quality corporate bond before you buy muni. Also, keep in mind that only the interest earned is tax free. You still have to pay capital gains tax on any profitable sales if you sell before maturity. You may even have to pay taxes on value appreciation if you buy at a discount from par and hold the bond to maturity. If you are looking to shelter capital and let it grow, the suggestion by Serket to put something in a Roth IRA is a good one. This allows you to put away after tax dollars which you will be able to invest in stocks, mutual funds, etc., and not pay any taxes on interest, dividends, captial gains, etc. When it comes time to start taking money out, it will be tax free because you invested after-tax dollars.I’d strongly suggest you get a good financial planner (fee-based, not commissioned) to help you sort out what your goals are and how to achieve them because as I think you probably see now, muni investing is not as simple as just collecting tax free interest.Just my $0.02. Hope it helps.

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