Investing sounds intimidating, doesn’t it? Many of assume that “investors” have millions of dollars to play around with and endless advisors to make sure they don’t make a misstep (or, if they do, their risk is mitigated). This is an unfortunate perception – because investing can help the average person grow a tidy nest egg for a rainy day, for retirement, or for other investments.
How can you get started?
Listen to Warren
Warren Buffett is one of the most successful investors ever. Period. His advice to new investors is to only make investments that you understand. Sounds so simple! If you don’t get it, don’t get it. Understand how the business or property makes money. Understand the financial outlook. Understand what you’re getting into, and what you can get out of it.
That said, here are a few places to start building your portfolio:
- Turnkey Real Estate. Many investment vehicles require you to wait to use your money and impose penalties if you withdraw funds early. Turnkey real estate is different; you can begin generating passive income and spend it (or save it) as you wish. You also relieve a great deal of the stress of owning rental property: your turnkey partner is experienced in all aspects of the process, from acquisitions and marketing to tenant selection and hands-on property management.
- Exchange Traded Funds (ETF). These are similar to mutual funds (which we’ll get to in a just a second) in that you invest in a “basket” of stocks or assets, not just one company. They are also low-cost, making them accessible for beginners. Look for a well-diversified option and start small. Consider this practice if you decide to invest in mutual funds – practice with a payoff!
- Mutual Funds. Here, you will also be investing in a mixed basket of assets. Unlike ETFs, which have lower commission fees and costs, you’ll need to invest at least $1000 to start. The upside is that your potential return will be higher.
- Roth IRA. This is an investment in your future. Roth IRAs are vehicles that require ongoing contributions – but the payoff is tax-free income when you are able to draw on it. This can mean a comfortable retirement.
- Certificates of Deposit (CD). Seems like an old-school investment strategy, doesn’t it? CDs have been around for a long time, and there’s a reason: they’re a solid investment choice, particularly for beginners and the risk-averse. They are remarkably safe; backed by the FDIC, you will never lose money. Now, you may not make much because, in return for safety, interest gains are lower. Still, it is a solid way to invest money.
When you invest, your money can work harder and smarter for you. Like Warren Buffett says, though, make sure you understand potential investments, the risk, and the potential rewards.