Investing is an important part of growing your wealth. It should be well known that the sooner you get started with investing, the better you have to set yourself up for future growth. Whether you are saving for a short-term goal, your children’s education, or retirement, you need to start as early as possible.
Unfortunately, there are a lot of people who don’t have the knowledge or the resources on how to get started. In this post, I will discuss what you need to know to start investing.
What is investing?
Investing in its most basic form is buying an asset in the hopes of making a profit or a material gain at some point in the future. When people hear the word investing, they most often think of stocks, but there are other types of assets that can be invested in, including bonds, real estate, and commodities.
Types of Assets
Stocks – A stock or share is part of ownership in a company. If you believe in a company’s mission, you may want to invest in that company, or maybe that company has fallen out of favor recently and you think it is poised for a comeback, you may invest in that company instead. No matter the reason, you must do your research before selecting a stock because they can be drastically different. Generally speaking, you buy a stock in hopes that the share price will go up – this is capital appreciation. Be advised, there are two different types of stock, common stock and preferred stock.
Bonds – A bond is debt. You pay a company for the bond, and in return they pay you interest semi-annually. If a company is going bankrupt, they must pay back their debt holders before they pay back the holders of stock. Generally speaking, you buy a bond for the income in the form of interest payments. Like stocks, there are many different kinds of bonds.
Real estate – Real estate is property, plain and simple. You can buy single family homes, duplexes, multi-unit properties, commercial properties, and land. Property, however, is expensive, and not everyone can afford to invest in it. For people who want to invest in property but can’t afford to buy it outright, there are Real Estate Investment Trusts (REIT).
Commodities – Commodities are physical assets. Some commodities include gold, silver, copper, corn, and oil. You can buy these outright, through forward and future contracts, or through ETFs.
Where are my investments?
There are different vehicles for your investments. Most of the time they are in retirement accounts, which include Traditional IRA, Roth IRA, 401(k), and many others. You can also make investments using a brokerage account. Unlike retirement accounts, the brokerage account does not provide any tax advantages.
Thanks to today’s technology, there are a number of apps and programs available to you to start investing. Here is an article I wrote about the different programs available for investors.
How much to start
Using some of the apps and technologies listed in that article you can get started with as little as $10. Depending on the institution, you can sign up for a periodic investment plan and start with a minimum of $50/month.
Investing is a very important part of your finances. It is important to know what you are investing in and how to get started. It is also important to know that the sooner you get started, the better. By using the various pieces of advice in this article, as well as some the apps or programs listed, you should be well on your way to becoming an investor.
So readers, what’s something you used when you first got started with investing?