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.

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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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Fundamental Principals of Investing


Making an investment because one of your friends has advocated it to you or deciding to invest after encountering some lucrative investment offer by yourself can become a critical mistake. It is not the road to wealth, but the road to failure.

 

Why is that and why amateur investors often do fall into that trap? This happens because beginner investors  often consider investing to be a pretty simple and straightforward process and as a result they neglect the basics of investing.

Before making any investment, you should learn and understand fundamental investing principals. Those fundamentals will help you to protect your money and increase your profits.

1. Diversification

This is probably one of the most important points you have to look at, when you consider how to start investing. Despite how appealing can be the asset you want to invest in, do not invest all the money you have into just one asset. This should be done for safety of your money. Instead you will be doing much better if you select few assets and diversify your money between them.

2. Holding cash

While making other investments it is important to always have some cash available. Why it is important to always hold some amount of cash? Because of market constant volatility and fluctuations there is a good chance, that an opportunity will suddenly rise. And that is where value investing comes in. Imagine that you discover, that stock price of a company, which has a good business model and fundamentals is far below the value it should be. It means that company’s stocks are undervalued and therefore will rise in future. With that in mind you need to act fast and buy those stocks, while they are still cheap. And cash you have successfully saved will help you to do that.

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3. Research

Before making any investment despite how safe it is – you will do much better if you make research first. Why it is important and how to start investing based on a research? Let’s have a look at an example.

For instance you have decided to put some of your money into a bank savings account, while this investment is safe by its nature, if the bank you want to invest is bankrupt, it won’t be a safe investment anymore. Or you want to invest into a stock market and see in a performance chart of the stock you want to buy, that it is undervalued and it is best time to buy it, while in reality it is not undervalued, it is the company you want to invest is on its way to bankruptcy. Always pay attention to others sources of information, not to the media, because when information is being widespread by the media – it could be too late.

4. Consider Fees

To calculate your future profits more precisely and decide whether investment is worth it or not, you should take into account fees. Despite which investment you will choose there always be fees out there. You may ask what fees? Well, when buying or selling stock – you pay some percentage to broker, bank also has maintenance fees etc.

5.Taxes

Taxes always was a complicated issue. Taxation laws are different in each country, but it is very important to find out these laws, before you start any investment. Ideally you want to make investment planning with tax advisor. It will be hard to find out all the nuances without tax advisor. But when you just begin to learn how to start investing or can’t afford tax advisor service, it will be enough to find out what tax is implemented for investments in your country.

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