Investing can seem like an appealing but very intimidating prospect. It can feel like a club that you need a secret password to join and aren’t sure who to buddy up with to get it. At the same time, you know there is the money to be made and could significantly improve your financial future by making a few smart choices now.
Thankfully, it isn’t an unattainable goal. In order to get started, you simply need to pick several investment strategies based on a few key factors. Here’s a breakdown of the best investment strategies and ideas to make money:
1. You need to master budgeting
You can’t start investing if you don’t have any money left over at the end of the month, so your first step should be to make a smart budgeting plan. Rent, utility bills, debt payments and groceries might seem like all you can afford when you’re just starting out, but once you’ve mastered budgeting for those monthly expenses (and set aside at least a little cash in an emergency fund), it’s time to start investing.
2. Remember you’re never too young to invest
By investing in the stock market, you’re essentially engaging in a do-it-yourself plan to ensure a comfortable old age. It is important to appreciate that there will inevitably be a number of ups and downs in the market, but by investing young, you’re giving your portfolio the chance to rides things out and emerge successful.
Ideally for your investment strategies, you want to provide decades for your money to grow and accumulate compound interest. Compound interest allows your account balance to snowball over time, even if you’re not contributing much of anything on a regular basis.
3. Deciding how much to invest
Although this may be more of a question of simply how much you have available, there are some additional factors that can help you establish what kind of goals you should reach for. For example, if you have a retirement account at work and it offers matching dollars, your first investing milestone is pretty straightforward- you should try to contribute at least enough to that account to earn the full match.
In the long run, that’s basically free money that you’d be missing out on if you fail to contribute. In general though, you want to work up to investing about 10 to 15% of your total yearly income for retirement. It might seem like a lot, but all it takes is a little planning for your investment strategies to flourish.
4. Investing in stocks
This is the first thing most people think of when it comes to investing. Also known as equities, when purchasing a stock, you’re buying a share of ownership in a single company. Stocks themselves are valued according to a share price, which can range from the single digits to a couple thousand dollars, depending on the company.
Although it can be a risky endeavour, there are safer investment strategies to engage with stocks, such as through mutual funds which you will find detailed below.
5. Investing in bonds
Unlike a stock, a bond is essentially a loan to a company or government entity. Under an established, or binding, contract, they have agreed to pay you back in a certain number of years. In the meantime, you make your money through the interest you’re accumulating.
Although bonds are generally considered less risky than stocks due to that fact that you know exactly how much you’ll earn and when, then tend to have lower long-term returns. Although not a bad idea to have in portfolio, they should only make up a small part of your long-term investment.
6. Investing in mutual funds
A mutual fund, on the other hand, is a mix of investments packaged together. Created to basically allow investors to avoid all the effort required to pick individual stocks and bonds, mutual funds allow you to purchase a diverse collection in one transaction. The fact that they are also diverse by nature also makes them less risky than individual stocks.
7. Investing in exchange-traded funds
Exchange-traded funds, like mutual funds, consist of many individual investments bundled together. In this case, the difference is that ETFs trade throughout the day like a stock and are purchased for a share price. Due to the fact that the requirements for buy-in tend to be lower than most mutual funds, these are a good option for many new investors.
8. Solidify your investment strategies
All in all, your investment strategies should be dictated by your saving goals, how much money you need to reach them and your time horizon. If you’re planning for a far-off retirement, the best place to have your money is in low-cost stock mutual funds, index funds or ETFs.
If you’re saving for the short-term, on the other hand, it is best to keep your money safe with some guaranteed investments. This might means simply keeping in a risk online savings account, cash management account or low-risk investment portfolio.