Investing has never been easier. You don’t need to be wealthy and you don’t need to have any prior experience. There are more options and more choices than at any other point in time. So just how should you start investing?
Build Up that Starting Capital
You need to begin with some starting capital. These days you get started with just a few hundreds. Try to save up as much as you can through building up a savings plan. Start a savings account and wait until you have at least a little extra money on top of an emergency fund. You don’t want to invest it all, get a market low, and exit at a loss.
Find a Brokerage Account
A brokerage account is your main source for buying everything from shares to bonds to funds. Many brokers require you to have thousands of dollars to get started with. But these days, there are brokers specially geared towards those with low starting capital.
They’re different because they don’t offer expensive financial managers or high management fees. Be aware that you’ll have minimal help along the way, however.
One of the biggest mistakes people make is to pick a random company or fund and invest in it. This is a sure-fire way of losing your money. You need to educate yourself as to what a company does and what’s likely to influence the value of their shares.
You can do this through the company’s financial information. You don’t need to be an expert in how they do things, just what their financial health looks like. All this information can be found online for free. Don’t fall for the people who demand lots of money for detailed reports.
When you first get started with investing, you should opt for low-risk investments such as index funds through a robo-advisor. Here is a review of Motif Investing where you can get a $150 bonus to sign up.
Use Dividends to Up Your Returns
Remember that investing is a long-term endeavor. When you make your investments, you should think about the impact of dividends. If you have 50 shares in a company and they deliver a dividend of $1 every year that means you can expect to get $50 for doing absolutely nothing. And this is on top of the increasing value of your shares.
The best way to handle dividends is to instruct your broker to automatically reinvest that money. Your returns will increase every single year if you do that.
Don’t Invest Money You Can’t Lose
It’s always nice to be positive about investing, but the reality is you can lose money from it. That’s why first-time investors should stick to low-risk investments. For example, you should invest in an established company and not in that hot new startup . Yes, the returns are lower, but you’re likely to get back at least what you put in.
Have a look at long-term performance when determining whether an investment is a worthy one.
The true value of investing is in compounding. For compounding to work effectively you need to get started early. The longer you procrastinate, the more time it’s going to take to reach your target figure. Those who start investing in their 20s can make millions through low-risk investments, but someone starting with the same strategy in their 50s will barely earn enough to cover a few years worth of expenses.
It’s Easier Than You Think
The message to take away from this guide is that investing is easier than you think. You don’t need a lot of money, a lot of time, or a lot of expertise. Some basic research is all that’s needed to start making your initial investments and securing you and your family’s future.
Are you ready to make the investment in your financial future?