Yes it does but you don’t need millions or even thousands to get started. You can start with a few hundred dollars and if that is out of your reach then you can get some mutual funds for as little as $25 as long as you continue to deposit to the account on a regular basis. Your $25 gets pooled with other investors to buy stock and you can earn a modest return. Here is a breakdown of how mutual funds work.
Types of Investments
Once you have determined that you’re going to invest and the amount of money you plan to invest, now comes the hard part…figuring out where to invest. There are plenty of options so let’s have a look at them.
Mutual Funds: This allows beginner investors to get into investments without any knowledge or having to manage the investment. Money is pooled together and fund managers decide where to invest. A professional money manager looks after the portfolio and tries to provide the best return on your investment.
ETF (Exchange Traded Funds): These are similar to mutual funds but the only track certain indexes. The cost of ETF’s are lower than a mutual fund since you don’t have an actual fund manager all the management is done largely by computer.
Bonds: If you’re a very cautious investor then Bonds are the right instrument for you. Companies issue bond which are effectively loans from investors, the company agrees to pay the “loan” back with interest at a determined time. Unless the company that issued the bond files for bankruptcy you can walk away with your investment intact. Some types of bond interest is even tax exempt, many retirees choose bonds for the income they provide.
Real Estate: Real estate is a great investment and an easy way to get into real estate investing is through an investment trust. You can become part owner of an apartment complex or a shopping mall. If you don’t want to go that route you can invest in property yourself and either rehab it and sell it or keep it as a rental unit.
Using a professional advisor
Should you use the services of a profession investment advisor? Professional investment advisors have years of training and the industry is heavily regulated, your bank will provide you with one. You can put together a portfolio with a strategy based on the amount of money you have to invest and the amount of risk you want to take. Bear in mind that this service doesn’t come for free. Professional investment advisors get paid, be from fees, commissions or a percentage of the profits made from their trades. If you want to avoid those fees they you need to learn how to do your own investing and manage your own portfolio, this isn’t for the beginner. If you’re new to investing then working with an advisor is your best option, you can always take on more of your own investing as you learn.