7 Great Investments for First-Timers
No matter your age, if you haven’t invested your money yet, there’s a good chance that the whole idea of investing is pretty intimidating to you. Whether you are doing financial planning in your 20’s, or are getting a late start and are already in your 40’s- it’s never too late to invest. While investing can seem confusing, there are a significant number of investments that are pretty simple to understand. It will likely take some time and dedication to understand what it means to invest, but the process is definitely worthwhile.
Investing is one of the best ways to make your money work for you and is more effective than placing your funds in an account with zero interest or spending all your funds. However, getting a clear understanding of finances can help you take control of your money. Even if you haven’t invested yet, you can always start the process, no matter how far you are in your career. Here are seven tips that you’ll want to keep in mind when you’re investing for the first time.
1. ETFs (Exchange-Traded Funds)
One of the disadvantages of mutual funds is the fact that they can’t be traded at a fast rate. If you try to trade the mutual funds too quickly, you may have to pay fees. An ETF is a lot like a mutual fund, and is a mixture of several assets. The fees for ETF are lower than mutual funds, but you’ll need to look out for complicated investments including leveraged and inverse ETFs.
These investments have be high-risk, so if you’re not experienced in investing, it’s best to avoid these types of ETFs. Exchange-traded funds are traded in the stock market in the same way that stocks are, which permits shareholders to easily react to changes in the stock market.
Stocks aren’t exactly the easiest investments, but they’re also easier to understand than you may think. You can really get prepared to invest in stocks, you just have to learn as you go. Take it slow when it comes to stocks and there are a number of low-cost brokers that can make stocks pretty affordable.
When you can set aside some money for investing, go ahead and give stocks a try. You may lose the funds, so it’s best not to invest a lot initially, but when you start to understand the stock market, you’ll use this knowledge to make better stock choices in the future.
3. Retirement Accounts
A retirement account is one of the most important investments you can make. You can choose from a 403(b), IRA or 401(k) to ensure that you have money set aside for when you are no longer working. If your employer has a retirement account matching program, be sure to participate in it. If you get a promotion, make sure that you increase the amount of money you contribute to your retirement account. Developing your retirement account should be a financial habit.
There are several investment methods you can choose when it comes to your retirement account, so you’re going to have to learn all the ways that your money can work for you in terms of investing to make sure you have the most money possible at retirement. You should expect to receive some tax breaks when you have a retirement account, and in order to find out all the benefits you’re entitled to, it’s best to hire a financial planner who can explain all the ins and outs of these types of accounts so that you’ll know what your benefits are.
4. Savings Accounts (with High Interest)
A high interest rate is relative when it comes to investing trends, but this is a little different from a regular savings account, since you’ll get a significantly more impressive interest rate than what you would if you opened up a standard bank account. The main reason for this is because in order for you to be successful at investing, you have to master the principle of saving.
Take a look at a few credit unions and banks and go for the highest interest rate you can find, and start making sure that you deposit money into the savings account as often as you can. Once you have a pretty good amount saved, you can start considering a portfolio.
5. CDs (Certificates of Deposit)
These are certificates of savings where you can deposit money for a period of between as little as three years and as much as five years. You then swap the money for interest and this is paid once the CD matures. Certificates of deposit usually provide a higher interest than regular savings accounts, but once you deposit money into a CD, you can’t withdraw it until your investment is mature.
If you take the money out before maturation, you’ll have to pay a fine or you’ll lose interest. The interest on CDs is a sure thing and is offered by the financial institution that issues the certificate of deposit, so it’s an easy way to make your savings a little more worthwhile.
6. Money Market Accounts
This type of account is also available through a bank or credit union. It’s pretty similar to a standard savings account, but it yields a noticeably higher interest rate and you’ll have to deposit at least $1,000 to $5,000 into the account to get started. A money market account allows you to write checks, but you won’t be able to make many withdrawals on a monthly basis.
Even though a money market account is a pretty safe way to invest, there’s still the possibility that you’ll lose money because you’ll be charged a fee if you go under the minimum balance. You’ll also incur a fee if you make more transactions than are allowed in the month, so a money market account could teach you how to adopt better spending habits.
7. Mutual Funds
A mutual fund is created when a number of investors pool their funds. This means that investors who don’t have as many monetary resources to invest in several different bonds and stocks and allows for diversification. Mutual funds are easy to use and can help you with money management.
It’s best to work with a financial planner to get more information on management expense rations and expensive fees that are associated with some investments. When you’re searching for a mutual fund, make sure you get involved in one that has low fees and has an index that can be tracked, which is pretty common with large mutual funds.
Even if you don’t understand everything about investments immediately, don’t panic. This guideline will teach you where to look for the right investments and which ones will work best for you.