Making investments can be fruitful and rewarding in the long term. They can lead to more comfortable retirements or sometimes provide a quick profit in short-term investments. Of course, as everyone has seen with cryptocurrencies and NFTs recently, some investments are prone to volatility. If you’re thinking of starting a business that invests in NFTs, be sure to consult with a lawyer who understands all the issues involved.
As a beginner, trying to find a way to start investing can be daunting due to moments such as bitcoin crashing, or when the housing market crashed back in 2008.
However, there are plenty of ways to invest with reduced risk, and good potential for the short-term and long-term even as a beginner.
How can you start investing?
There are some initial decisions you will need to make before you can start investing in any market. First off, you should decide on how much you wish to invest, and the purpose of your investments.
When looking at making investments as a beginner, consider your goals and what you are aiming for. Do you wish to make small returns on short-term investments, or are you aiming to create a retirement fund?
If it is the latter then you will need to allocate a sum each year to put into an investment account. Something like a 401K or an IRA would be appropriate for this purpose.
You can then decide what areas to invest in. As a beginner, it might be wise to use stock picking services to help choose these investments. Bonds, mutual funds, annuities, and unit investment trusts are all possible instruments for an IRA.
You can look at these investments in a little more depth below.
What investments should a beginner look at?
Many people started to look more seriously at investing during the pandemic. With so much time available suddenly, individuals looked at innovative ways to make money while staying at home. Investing wisely can lead to a good ROI, and there are more than enough choices. Perhaps too many for newcomers.
Stocks or shares
Depending on which business you are looking into investing in, you may be able to purchase stocks in a company for pennies, or they may cost you significantly more.
Currently, Apple’s share price is floating around the $148 mark, while other businesses’ stock is trading at way below this level. Purchasing stocks gives you a share in the business, and some will pay dividends to shareholders.
The problem with investing in stocks is that it can be difficult to foresee the future and whether the share price will go up or down.
Newcomers often confuse bonds and stocks but they are quite different. Bonds are in effect a type of loan. You give money to a business that in return promises to pay you interest for a number of years, after which they will pay back the principal amount in full.
The downside to bonds is that the ROI can be poor.
This type of investment could appeal to a newcomer as it offers a package of diverse instruments. You invest in a company known as a mutual fund which in turn invests in many different securities.
This means as a beginner you don’t need to worry about choosing the best stock options, and your risk is limited due to you having a share in a diverse portfolio.
An ETF or exchange-traded fund is a good option for a beginner investor. These are comparable to mutual funds but are traded during the day in the same way that stocks are.
One benefit for beginners is that ETFs have lower minimum investments than mutual funds but still have the benefits of containing diverse securities.
Is day trading suitable for a beginner?
Day trading among amateurs took off in a big way during the pandemic. This was partly due to people having more time on their hands than usual, but also because trading apps and platforms are more readily available than before.
It is very simple to download a trading app to a smartphone and indulge in day trading from the home. However, there are many risks to day trading as a novice. Amateur investors lost $1 billion while day trading during the pandemic.
Day trading can also require a substantial amount of capital, to begin with. This makes it a risky strategy for a beginner investor. If you are considering this option then try using a demo trading account first.
If you are looking at savvy ways to grow your money then investing in stocks could be a good option. As a beginner using a stock picking service could remove some of the hard work and risk from the investment too.
However, all investments carry some risk, and beginners should be aware that not every option will provide a solid ROI. Many investments can end with a loss, but diversifying with mutual funds or ETFs can offer great potential to newcomer investors.