Want to Start Investing? Here’s What You Should Know

computing finances

Most people get intimidated when it comes to investing. Some also have the incorrect notion that investing is only for the rich. There are many investment options that you can choose from, that it can be overwhelming at times. Of course, there is the fear of choosing the wrong investment.

Investments can help you grow your hard-earned savings much faster than a normal savings account. If you want to invest, you must first clear off your personal debts. It would be pointless if your investment is earning while you are also paying for interests in your credit card debts.

You can invest in stocks, funds, real estate, and commodities such as precious metals produced by trusted gold and silver refineries.

Why Should You Invest?

Now the big question is, why bother investing? It is not guaranteed. Investing requires time and lots of patience. Unless you are doing day trading, which can be risky for the uninformed, your investment needs time to grow.

By definition, investing is committing your money to an endeavor, which can be a property or a business, to grow your capital and reap some profit in the future. It is a tool that can help you achieve your financial goals. It can also provide you an allowance for unexpected and unforeseen expenses.

Your investment can give you passive income, which you can add to your capital or invest in other investment vehicles. It can give you income through interests, appreciation, and rent for rental real estate properties.

The goal of investing is to build wealth. However, it is not without risk. Some investment vehicles can give you possible higher returns but expect more volatility as well. Most investors take advantage of averaging and long-term investing to maximize their gains and profit.

If you don’t invest, you will miss many opportunities to grow your wealth. Here are the top three reasons why financial-savvy people make it a point to invest.

  • Create wealth. When you invest your money, you allow it to grow. The return on your investments allows for compounding, your ally in building your monetary value.
  • Beat inflation. This is probably one of the best benefits of investing. Your cash over time will lose some of its value because of inflation. The interest that your money will earn in a savings account will be lower than the inflation rate. Investing allows your money to grow despite inflation since the returns are most likely higher than the inflation rate.
  • Retirement fund. Do not depend on your social security for your retirement pension. If you want to maintain the quality of your life, take charge of your money. Investing your money for the long-term can give you higher returns on your retirement fund. Add regularly to your fund to take advantage of bearish periods.

Where Should You Invest?

computing cash

There is a wide range of investment products. It can be overwhelming for beginners to choose a type of investment for them to focus on. Here are some of the most common investment vehicles that you can try. Remember to do your research first. If you are unsure, consulting a financial adviser can be a good idea.

1. Stocks

Investing in stocks allow you to own a certain part of the company. It is a well-known investment vehicle that you should take advantage of. When you buy stocks, make sure that the company is here to stay. Look at its fundamentals. What are its core services? Will it still be in business ten or twenty years from now? Buying stocks may be easy, but choosing the stocks that will help grow your wealth will require research on your end.

You can buy stocks from a broker or an online brokerage platform. Stocks can be risky because its value depends on the movement of the market. If you are investing in the long term, which you should, take advantage of the averaging process. Buy more when the market is doing poorly, and prices are all red.

2. Mutual Funds

If investing in stocks is a bit intimidating for you, you can start with mutual funds. Mutual funds are managed by fund managers. The funds are invested in either stocks, bonds, or both. The risk is lesser because an expert is in charge of diversifying the portfolio to reduce the risks.

3. Bonds

When you buy bonds from a company or a government entity, you lend your money to them. You will earn back your principal plus interest when your bond matures.

4. Commodities

Commodities refer to physical products with monetary values that increase over time. The most common commodities are precious metals, such as gold. Many people prefer investing in commodities because they can use them while their value increases, such as jewelry and designer watches.

5. Real Estate

The real estate industry has made many people wealthy around the world. Investing in real estate also comes with its own unique risks. Location plays a big factor in the success of your real estate investment, so choose wisely.

There are other investment products that you can also explore, such as retirement funds, exchange-traded funds, and certificates of deposit. Your choice will largely depend on your financial goals and your risk preference.

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