While saving your money is great, it often isn’t enough to make your money grow. Investing, however, is a powerful tool that can make your money work for you.
This guide is a quick crash course on the basics of investing. We’ll go over a few key things to consider before you start as well as an overview of some of the most popular types of investments.
From how to best use your money to mapping out your objectives, here’s a round-up for investing 101.
Factors to Consider for Successful Investing
You may have several questions running through your head such as what stocks to buy or is tanzanite a good investment? Investing can be overwhelming at first.
If you’re ready to jump into the investment waters, there are a few factors you should consider first. Knowing what your goals are will help you determine if a short-term savings plan is a better play or if you should invest for the long-haul instead.
One of the most important distinctions to understand is the difference between saving and investing. While savings works to amass money, investing actually makes your money multiply.
If you’re looking to achieve a short-term goal, saving is going to be the quickest and most effective way to do this.
If you’re looking to build long-term wealth, investing makes growth a priority instead of liquidity as is the case with saving.
Put Your Money to Good Use
One of the first things to consider is how much you’d like to invest. If you’re worried about taking from your savings, know that you can both save and invest at the same time, even on a small budget.
If you are starting out and you don’t have a ton of money to invest, don’t stress. Even investing a small amount can add up to big savings in the long run.
Before you invest, you should first try and get your debts and savings in good shape. Debt comes with expensive interest rates. Paying off your debts before you start investing will ensure you’re in the best financial shape possible.
The money you spend on interest may actually be more than the money you’d earn on your investments.
What Is Your Objective?
A common goal with investing is often to save for retirement. According to a study published by CNBC, 15% of Americans have no money saved for retirement. Investing can help make sure you aren’t in that 15%.
Investments should be looked at as a long-term solution to growing wealth. This makes investing the perfect way to save for a big goal like retiring.
Another great reason to invest is to build wealth. Diversifying your investments can help you put a little money in a few different places such as the stock market, real estate, and a 401(k). Putting a little money into each of these buckets can help you build wealth over time.
Common Types of Investments
There are a few common types of investments that you may have already. If you own a home or are employed and taking advantage of an employer-funded 401(k) program, for example, you’re well on your way to building wealth.
1. The Stock Market
The stock market is one of the most common and successful forms of investing. The stock market will also give you the most bang for your buck.
While investing in individual stocks may take a little research and time, if you’re up for the challenge, start small and dip your toe in.
2. Mutual Funds
A mutual fund is a great option for beginners. These act as a bundle of packaged investments that you can acquire in a single purchase. A 401(k) is an example of a mutual fund.
If your employer offers a 401(k) program, this is a great way to start investing and the process is quite simple. Your company will often match some of the dollars you put in.
A company matched 401(k) program is like free money. If you’re able to, max out the contribution limit to take full advantage of your employer’s contributions. The money is automatically withdrawn from your paycheck and it helps make investing easy.
3. Real Estate and Other Investments
Real estate is another common investment. Whether it is the home you live in or a property you buy solely as an investment, real estate can be a great long-term option for building wealth.
You can earn money in the form of equity or even earn passive income on rental properties, for example.
4. Other Forms of Investing
Additional forms of investing include fine art, gemstones, cryptocurrency, collectibles, and peer-to-peer lending.
Investing in gemstones or fine art, for example, may take a little research but these can also be fun and lucrative hobbies to help you grow your wealth.
Why Is Investing Important at Any Age?
When you look to start investing, it is important to know that you can start at any age. It is never too late to start.
When you are younger, you’ll have the advantage of time. Time allows you to take a little more risk with your investments and it also means you may have access to more disposable income.
Starting younger also means you can take advantage of investing while you’re in your prime working years.
As you age, you may have more money saved and also the ability to make larger investments in things like real estate. You also may have more time to look into investments that require some procurement such as gemstones, fine art, and cryptocurrency.
How to Be a Good Investor
The most successful investors aren’t always the wealthiest people. Understanding the importance of time is one of the fundamental basics of investing. Even if you don’t have a lot of money to invest, starting small and early will help you build wealth gradually.
Getting a handle on your goals is a great place to start your investment journey. Whether you’re looking to diversify your wealth or save for retirement, investing isn’t just for stock-savvy traders.
Anyone can start investing and achieve their financial goals with a little bit of planning.
For more great investment and savings resources, check out the finance section for helpful guides and tools.