How to Start Investing: A Beginner's Guide

Knowing how to invest your money can be a challenge at times.

In addition, we are sure you will agree with us when there is certainly no lack of information on investing present in the digital age, especially with a ton of online investment firms around. However, handling massive amount of data can be challenging at times.

That is why we came up with a little guide to assist you in getting a solid grasp of how and where you can invest money. Let us find out.

How to Invest Money

When you are thinking of how to invest money, it is best to begin with, the basics. I am sure any financial advisor will second that. These basics comprise establishing your investment goal and finding out where to invest money to accomplish every goal best.

Investing Money for Beginners: When you are investing money, what you are doing is either purchasing a portion of a commodity or a company with the belief that the value of that commodity or company will grow as time passes.
Do not forget: Investing is not a get-rich-quick scheme, but instead a way to grow the wealth you already have. Even though investing is a great way to increase your wealth, you do not have to be a millionaire to get started. In fact, compound interest demonstrates that even little sums of money may transform fortunes as time passes, if you choose the right investments.

Where Should I Invest Money?

You have plenty of options when deciding where you should invest your money. These options consist of:

The Stock Market: Arguably, the best and familiar place for an investor to put their money is into the stock market. When you purchase a stock, you will then own a small portion of the firm you bought into. When the firm profits, they may pay you some part of those profits in dividends depending on the stocks you own. When the value of the firm grows as the time passes, so do the share prices, meaning you can sell your shares for a profit later.
Investment Bonds: When you buy a bond, you are essentially loaning money to either the government (for investors in the USA, this is usually the US government, though you can purchase foreign bonds too) or a company. The company or government selling you the bond will then pay you interest on the loan throughout the lifecycle of the bond. Typically, bonds are as less risky than stocks. However, their potential for returns is far lower as well.
Mutual Funds: Instead of buying just one stock, mutual funds allow you to purchase a basket of stocks in a single buy. A mutual fund manager usually manages and choses stocks in a mutual fund. However, here is the kicker: when you invest in their mutual fund, these mutual fund managers charge a percentage based fee. In the majority of the cases, this free makes it challenging investors to beat the market when they invest in mutual funds. Besides, a large number of mutual fund investors do not ever hit the stock market.
Savings Account: By far, the worst way (though the least risky way) to invest your money is to feed it to a savings account and let it gather interest. However, as is typically the case, low risk does not mean high returns. While the risk of you putting your money into a savings account is close to zero, often, there are almost no returns. Still, the role of savings accounts becomes important as they enable you to stockpile a sum of risk-free cash that you can use in emergencies or to buy other investments, so you do not touch your other assets.
Physical Commodities: Physical commodities are your physically owned investments, like silver or gold. Often, these physical commodities serve as a shield against challenging economic times.