Today I’m pleased to introduce this guest post from Andrew at Slick Bucks, a site full of advice on money management and investment. Thinking about making a start with investing? Andrew’s got some tips for you:
The days of young people and newly married couples putting money into a savings or money market account are long gone. The return on those types of investments are minuscule. The money might be safe, but it hardly offers anyone the chance to build a significant nest egg on top of what they can earn from working.
With the continuing growth of online brokerage firms and the ready access to financial information, more and more people are looking for other types of investing. The goal is usually investment income motivated with an acceptable level of risk.
Therein lies the problem for beginning investors, learning how to evaluate the potential return versus the risk involved with getting that return.
Best types of investing
For the demographic mentioned above, there are three forms of investment that warrant serious consideration. Keeping in mind all investments come with some type of risk, these are mid to long-term investments that offer a solid year over year return with an acceptable amount of risk.
In fact, all three have proven to be terrific investments if the investor is patient and willing to accept occasional decreases, given that nothing goes straight up and keeps going.
In order of risk from highest to the lowest, the three best investments are in a business interest, stocks/bonds and real estate.
A business investment in like investing in one’s self to create a successful business that can provide for a family well into the future.
The stock and bond markets can be risky, but investors who stick with the best and most successful companies will realize a decent return over an extended period of time.
Real estate is also a good investment over time. Recessions tend to take real estate down for short periods of time, but real estate will generally show significant appreciation over any 5 to 10 year period of time.
5 investment tips for beginners
Before you start investing your hard-earned money without any experience in doing so, you need to take in a little advice to get you headed in the right direction.
With that in mind, here are 5 tips designed to help beginners get off to a good start as investors.
1. Have a plan
If you get in the car and start driving without knowing where you are going, you stand a great chance of getting lost.
The same thing is true of anything you do in life. Before you start investing, you need to ask yourself the following questions:
- How much money do I have to invest now and in the future?
- What is the purpose or goal of my investing?
- How much risk can I tolerate?
By answering these key questions, you will be effectively building a road map for how you should proceed and which investments warrant the most consideration.
2. Start now
It’s very easy for someone to land that first job and immediately start trying to build a lifestyle based on those earnings. When they do this, they tend to put off saving money until “they are established.”
The problem is when they finally get established, they start looking for a better lifestyle and again, the saving of money remains a low priority.
Here’s a better idea. You can settle for a little less in the beginning and start saving and investing a small incremental savings amount now. The longer you give an investment to grow, the bigger it will become over time.
The amount of time you have to earn and save is limited. Starting today, you should take advantage of you earnings opportunity and invest some portion of it in your future lifestyle, like after retirement.
3. Ask for help
Investing your most important asset, your cash, is serious business. Before you put your money into any investment, talk to people who understand investments and perhaps invest monies for a career. Your bank, family and friends and professional investment counselors are all good sources of information.
If you ask the right questions and actually listen to the answers, you will learn about types of investments and the potential for returns and the associated risks. When you have some base level of knowledge, you should be ready to find the right investment(s).
4. Keep it simple
Investing your money can be as simple or complicated as you want to make it. You will need time, especially in the beginning, to learn about all the nuances of each and every type of investment opportunity you might want to consider.
In the beginning, you need to keep things simple until you acquire the knowledge to graduate to the next level of investing. As a example, you might want to invest in the stock market.
You might want to stick with just two or three stocks that are well known and have a stellar reputation for being steady earners. As time passes, you will learn more about the stock market, which will give you the ability to become a little more aggressive for little better returns.
Never, no never, put all of your eggs in the same basket.
The best investment portfolio is an investment portfolio that includes a well balanced package of investments. If you choose to invest a little of your money in something risky, you would be best served to invest a like amount in something very conservative.
Even with real estate, the last thing you want to do is put all of your money in a home and then watch the bottom fall out of the real estate market one month after your purchase. A balanced investment portfolio is the key to financial security now and into the future.
Hopefully, the information provided above will serve as guidelines to set you off into the investment world with the basis for making smart decisions.
Your future should be just as important as today, and investments are all about getting to the future with the ability to live just as well as you have in the past.
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