How to make your money work. Everything you need to know about investment
Earning money is one of the basic social needs. However, if you want to improve your financial state and to let your money grow, you need to manage it efficiently. This is the reason why you need to know how to invest and where to invest. So, let’s go through the basics of wise investing and learn several useful tips.
Why Investing is a Good Idea
So why is the whole fuss around this phenomenon? The process of investing money helps grow your wealth significantly and the key is compound returns. Given enough time you can turn a simple cent into a million of dollars. How much time does it take to gather a rich crop? Let’s count.
Say you start investing at 22 putting $50 a month into your 401K with a 50% company match. Then at the age of 65 you will have earned over $1 million which amounts to 3.5% as well as an 8.5% return. This is a simple example which demonstrates the power of investing money.
So, if you are wondering when to start investing, the answer is the earlier the better. In other words, the best time is right now! Even though it feels quite uncomfortable to use the money like this for the first time, the reward is rather promising.
How to Start Investing
The very first step to make before you put your money into work is to understand the sphere you are interested in. For example, there are various types of people who deal with certain markets.
- Doomsday Preppers — people who invest in metals of value and real estate;
- Gambling Day-Traders — people who work with stock market;
- Indexers — people who invest in anything;
So, it is a good idea to figure out in which sphere you are interested in. Try to study the market thoroughly and to feel its fluctuations. Some people have entire strategies at this point.
If you doubt about which sphere to choose, you need to make sure that guaranteed interest rates are high enough. For instance, safe online savings accounts offer more than 2% with FDIC insurance. Thus, you have a guarantee that your money is somewhat protected by federal government.
Proceeding further let’s talk about where to invest. The most popular markets today are:
- Stock market
- Real estate
Crowdfunding is good choice, if you are interested in peer-to-peer ventures such as lending or real estate. On crowdfunding platforms you can invest in any project at a very early stage. As the project grows you get your share.
Stock market is similar to crowdfunding but it is more specific as you understand. In this case you should not put more than 10% of your money until you have enough experience. In fact, stock market is a really good place to start because you can use pretty low amount of money.
Real estate is one of the most rewarding markets as well as one the most risky. Buying various houses or apartments will pay twice as much as the time goes, however you need a small fortune to obtain it.
Independence or a Piece of Advice?
If you’re not very experienced at investing, you can get your own experience (which is likely to cost you some money) or hire a financial advisor. This is the professional who is supposed to know everything about when to invest, which platform to choose and how much money to use.
There is a wide range of options to find such type of person. You can hire an online advisor or choose a face-to-face approach. Online variant is less expensive while with an advisor sitting by you will understand things much better.
On the one hand, if you ask for professional advice you are pretty sure that you will not lose. On the other, hand some people feel uncomfortable when someone else handles their money. However, it is a common case that people with large sums of money trust their financial advisor who does all the work and they get their dividends only.
Is It Really Worthy?
To begin with any business as well as any money-based sphere involves risks. You should be ready that things go wrong at certain moment. However, wise approach with a good strategy is profitable.
It is true that there is a lot of scam on this market and many people have lost their fortune during the Great Depression. However, investing at young age (even at 16) does pay good dividends. For example, think about investing in your retirement account. It is not as risky as quick-fix stock trading.
Investing is more like a long-term strategy which gives you control of your future. Even a bad investment is less risky than not investing at all. If you bear in mind our paragraph about compound interest, it is obvious that time as well as age play the crucial role here.
All in all, investing is more than just allocating your funds wisely, it is an entire life strategy. If you take care of your future and plan every stage of your life thoroughly this is a good way to use your money. Give the right approach and a good share of adventurism you are pretty sure to get success.