Why should you start investing? Most people can’t realistically retire on Social Security benefits alone. Experts actually recommend investing around 10%-15% of your gross income in a retirement fund.
Investing also helps you generate passive income. This means your money works for you, instead of you working for your money.
Most of all, investing is fun! There are many ways to invest your money, from stocks to precious metals. You don’t have to sacrifice your own personal style to invest.
Are you ready to start investing? Are you unsure how to begin? Read on for our essential guide to investing for beginners!
Start Now Even if You Start Small
Out of all the tips for new investors, “start now” sounds like the most obvious. This financial advice isn’t being figurative, however.
Start investing literally today, even if it’s a small investment. Every day you delay investing, you lose valuable money from compound interest.
Need convincing? If you start a fund with $100 and only contribute $100 per month, a 6% annual interest rate will still gain you $95,444.17 over 30 years.
If your contribution is $200 a month but you only invest over 20 years, however, that amount decreases to $88,606.13. You just lost out on over $6,800 in savings, even though you actually contributed $1,000 more into this investment fund. Investing sooner is investing better.
Research Your Investment Options
Starting an investment portfolio can be a little daunting at first. There are many investment choices, and everyone has their own theories on what’s best.
The best strategy for beginners is usually passive investing, so you don’t have to directly manage everything first. This allows you to make contributions while you’re still learning.
The risk is also lower while the stability is higher. You may still need to diversify your portfolio eventually with active investing to see higher returns, however.
Examples of “low maintenance” investments for beginners include:
- Mutual funds
- REITs
- ETFs
- High-yield savings
- Certificates of deposit
Both REITs (real estate) and ETFs (precious metals) invest your money in physical assets, but you don’t directly own them yourself. You can also invest in real estate and precious metals directly.
For example, many people combine their coin collection hobby with an investment portfolio and purchase precious. Visit here to learn more!
Budget For Your Investments
Once you decide what to invest in, it’s time to determine how much you want to invest. You can do yourself and your investment portfolio a favor by setting up automatic contributions.
Automatic contributions take the money out before you have a chance to spend it. Without this setup, you risk forgetting or impulse buying money away from your monthly investment budget.
You can also help your investment budget by paying off your debt- and keeping it off. Like inflation, the interest accrued on debt can quickly negate your investment interest.
If a $1,000 investment earns 6% per year, for example, but your $2,000 credit card debt has a 12% APR, you aren’t actually earning as much money over the long haul as it seems. And once your debt is paid off, you can also re-budget your debt payments into your investments.
Don’t Delay On Your Future: Start Investing Today
Everyone starts out as a beginner investor. The greatest “trick” to investing is simply to start investing, even if you start out in something small and low maintenance.
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