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 “” 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.

Ways to Invest in Gold and Other Precious Metals

If you are one who pays attention, however briefly, to what you see, hear, and read, then you might be aware that gold investing is a big topic these days.
Turn on a talk radio program and often, there’s a series or informational on the subject. Internet ads urge people to buy gold now and protect yourself against a worsening economy and worldwide economic crises. Gold can protect against rising inflation in the country and in the world.

It’s wise to keep in mind, though, that a stable economy can limit your return on investments in gold and other precious metals. With that kept in perspective, what are some ways that one can invest in gold, and which ways might prove to be most profitable for the investor, whether new to the market or not? Before beginning to look at various ways to invest in gold and other precious metals, try to remember the golden rule of investing. This is the one pertaining to not putting all your eggs in one basket. Diversity is the key to successful investments of any form, and the same goes for gold investments. Whatever your investments, a certain percentage invested in gold is a good idea, if only because it adds diversity among your investments. And although it’s possible to have gold as your only investment, this is usually not recommended. Spreading your investments around offers better financial protection in the long run. Once you have decided to invest a share of your money in gold, how is this done? What are some various ways to invest in gold and/or other precious metals?

One method is to purchase gold itself – in coins, bars, biscuits, jewelry or any physical form made of gold. It’s real, it’s tangible, it’s gold. If you purchase physical gold for investment purposes you will need somewhere to store it, such as a safe at home or a safety deposit box. There are pros and cons of each form of physical gold purchased, and some further research can help you decide whether to invest in gold jewelry, coins, bars or biscuits. A gold biscuit is basically a gold bar, only one made from “stamping” a rolled gold sheet. This is thinner than a bar made from pouring gold in to a mold, which is known as a “cast” bar. Dealers often tend to refer to both types as bars. Physical silver can also be purchased as jewelry, bars, or coins.

gold bars

Another method of purchasing gold and some other precious metals is the paper method. Paper investment can be accomplished through mining stocks, also known as equity, ETF’s , or Exchange Traded Funds, and, recommended only for the very experienced investor, futures contracts or futures markets. E-gold or silver, or digital gold/silver currency, is another investment option.

For precious metals outside of gold or silver, the paper method is normally the best way to invest. While platinum can be physically purchased, in coins, it is harder to cash in that way. Palladium can also be used in jewelry and coins, but is about half the value of gold. Two platinum metals, iridium and osmium, are not usually used as investments. Likewise, investments in rhodium and ruthenium are not investment type metals, either. All of the platinum group metals are rare, and for those who do invest in them, one must buy in very large lots to get a good price. There are no real futures markets with these metals.

For those interested in investing in gold, silver, or other precious metals, research in to the various investment methods is recommended, especially for those who wish to get the best return for their investments. There are some who feel investment in physical metals is less risky than paper investments in the same metals, and others who believe just the opposite. Much depends on factors such as rarity, demand, and the overall market.

If you want to buy gold or silver, and are safe places to do that.


Tax Tips

While it is important to know which investment options are available at the moment, it is also important to cover tax tips for different types of investment.

1. Bonds

Bonds are issued by many authorities and institutions. Depending on bond type and other conditions it can be fully taxable or tax free.

Corporate bonds (bonds issued by a corporation) are fully taxable. These bonds pay highest interest rate though.

Municipal bonds are tax free at all levels only if investor resides in the same state as the bond issuer.
However if investor resides in another state, then his interest is taxable on his state income tax, but not on federal tax.

Government bonds are subject only to federal taxes, but not to local state taxes.

Tip to reduce bond taxes: Even though government bonds are not taxable it doesn’t mean that those bonds are the best choice, because their interest rate is usually lower than other bond types can offer. When selecting which bond to buy you should calculate and compare expected yearly profit of government bonds and expected yearly profit of other bonds ( in this case don’t forget to subtract taxes in order to see pure profit). Thus you will be able to make the right decision.

2. Precious Metals

Precious metals are taxed in the majority of countries. Tax usually does apply when precious metals are being sold at a profit. However taxes on precious metals vary by state or country. It also can vary depending on what type of precious metal you hold and want to sell.

Tip to reduce precious metal taxes: Look for countries (or state) with lowest precious metal taxes to sell your holdings.

3. Certificates of Deposit

Interest earned with certificate of deposit is also taxable. It is a subject to taxes on a federal level. However taxes must be paid only when interest is accrued into your bank account.

Tip to reduce taxes on certificates of deposit: Do not withdraw your money before certificate of deposit matures, because then you will have to pay penalty for early withdrawal ( it is usually around 10%, leaving you with negative profits in most cases).

4. Mutual Funds

Mutual fund taxes is a bit more complex subject, because it includes taxes on interest and taxes on capital gains. Both types of taxes are subject to taxes on a federal level and in most cases on a state level.

Tip to reduce precious metal taxes: Mutual funds with high turnover are subject to higher taxes and therefore it will cut your gains. So instead of looking for mutual funds with yearly turnover of 100% or more look for mutual funds that that have yearly turnover of 20% or less ( for example index funds).

You must remember that tax rates are constantly changing and new tax laws are being constantly introduced. As a conclusion it would be better to contact your local tax advisor for more actual and precise information on taxation as well as for advanced options on how you can legally reduce your taxes.