Investing 101

Posted on Aug 27, 2017 in Types of Investing

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.

Why You Should Start Investing Early

Posted on Aug 26, 2017 in Investing

For most young people, especially low income earners, investing is not a priority. Youngsters wait to become more financially stable so as to engage in investment decisions not realizing that there are countless opportunities sliding by. The fact is, beginning the investment journey early in life sets you up for more financial freedom in your latter years. Below are some of the reasons why you should start investing early in life.

Ability to risk more In the investing world, the younger you are, the more risk you can undertake. You can invest in more volatile investment instruments because you have fewer financial responsibilities and are naturally driven to risk, thereby benefiting from the higher-than-average returns.

Compounding benefits

While in the early years of life, you have a lot of individual years to invest. When money is put in an investment vehicle over a long period of time, it earns more because the earnings from the original investment are reinvested. A small investment made in your younger days will usually generate more than a bigger investment made when older. Therefore, investing early offers the advantage of making more money. This is also true because as a young person, you are less likely to interfere with the investment and let it run its full course.

Flexibility and Recovery

While most young people are not adept at investment techniques, they are very flexible and can learn the ropes much faster. The successes and failures encountered along the way are key to sharpening their investing skills. For these young investors, there is enough time to recover from mistakes and losses incurred from their investment choices and decisions.

Better Personal Financial Management

Engaging in investment decisions early in life enables you to cultivate financial discipline. This is especially the case when your income increases. When you start investing when still young, the idea of looking at the future becomes so deeply etched that the financial decisions you make are based more on investing than spending. This builds financial character and rewards you in your later life with more wealth.

Future debt-free purchases

Growing older comes with more responsibilities such as owning a home and other property. Investments that you had undertaken in your early days have now substantially grown. You can use the money generated to buy property and other assets without incurring debt and further interest cost. Investing when still young may seem like a daunting task at first, but the payoff later in life will be worth the sacrifices made.