This beginner investing guide outlines three options to consider if you are just starting out or are a young investor.
Suppose you’re a young investor or just starting on your investing journey. The earlier you can get into the habit of saving and investing your money wisely, the more successful you’ll be throughout life.
Beginner investing guide: 3 suitable options
In this beginner investing guide, we’ll talk about three different investments that are perfect for young investors looking to earn some extra cash while being smart with their money!
1 Short Term Investments
Short-term investments are a great way to put your money into something that will yield you a little bit of profit without being too risky. These investments aren’t very long and typically require less time to monitor than other assets like real estate or businesses.
Some examples as a beginner investing guide include:
- Savings accounts (which may be helpful in emergencies)
- Money market funds (like savings but more liquid; can use this for investing short term since it’s tied up for only days at most)
- Certificates of Deposit (CDs) lock up your investment capital while still offering some interest return on the money. The downside is they’ll usually have slightly lower rates than standard savings accounts do, so you’ll probably only use these if your money is tied up for a year or more.
These are great short-term investments to start building wealth with because they’re easy and don’t require too much effort on our part! They also aren’t as risky since we can expect some interest return without losing out entirely if something goes wrong.
2 ‘Buy to Rent’ Real Estate
This is an excellent investment for young investors and beginner investing to get into because of how lucrative it can be. If you find the right rental property and manage your tenants correctly, you could earn up to $50k per year in passive income!
Aside from this being an excellent way to make money on properties that don’t require your constant attention (because let’s face it: we’re all busy!), buying real estate has some tax benefits as well. For example, suppose you buy a house with someone else or multiple people who live together. In that case, they’ll qualify for more deductions than they would alone, which will lower their taxable income- thus reducing the amount of taxes they owe too!
If none of these apply, but you do rent out some of your properties, you can still deduct the interest on mortgages and other money spent to improve or maintain those properties.
3 Retirement Annuity
Another excellent option as a beginner investing guide for young investors to get into is a retirement annuity. This is because it’s the minor risk investment we’ll talk about today and offers some of the highest returns! Retirement annuities are like savings accounts that you put money in and then get paid out by when you reach a certain age (typically 65+). The downside, though? You can’t withdraw your funds until this time comes- which makes them perfect investments if we want to save up for something big later on down the road.
Some examples:
Traditional IRA: Every year, there’s an annual limit on how much money you can contribute, and any earnings within these accounts won’t be taxed either since they’re meant solely as retirement savings.
Roth IRA: These are a little different since your earnings within the account will be taxed, but you won’t have to pay taxes when you withdraw the funds. This is because contributions are made with after-tax dollars rather than pre-tax ones like traditional IRA accounts do.
Beginner investing guide: the 12 rules
- Understand your investments
- Take responsibility
- Don’t put everything on one horse
- Long-term strategy
- Set yourself a goal
- Watch out for costs
- Keep a cool head
- Expect losses
- Be skeptical
- Return comes from risk
- Reinvest your winnings
- Just start!
The 12 rules provide a solid foundation when you want to start investing. However, financial flow touches on many topics, but does not talk in depth about a more specific topic. Since the video is aimed at beginners, that’s perfectly fine. Nevertheless, one can discuss how useful it is to diversify very broadly . In order to better assess how you react emotionally to stock losses, you should definitely start with a broadly diversified portfolio.
After a while, however, you can estimate how much price losses will affect you. If short-term negative numbers in the portfolio do not encourage you to panic selling the securities, you can certainly increase your share quota.
Another negative thing about investing in funds or ETFs is that you will likely inevitably buy stocks that contain immoral companies. If you don’t want to participate in weapons manufacturing, environmental degradation and famine, you shouldn’t invest in ETFs either. The ethical aspect is often neglected. In addition, government bonds are referred to as a safe investment. That may be true, but government bonds are very low-yielding. Even inflation cannot currently be caught up with “safe” government bonds . Call money accounts are also not suitable as a financial investment for me. You can park your money there for a maximum of short term.
The concept of risk should also be further defined. You only have a risk with an investment if you don’t know what you are doing. Then you should also diversify your capital . However, if you are an expert in your field, you can probably invest better if you focus on certain things. In stock trading, this is also called focus investing , which Warren Buffett also pursues. Nevertheless, it is absolutely right to go into the long-term nature of an investment several times. Speculation must never be confused with investment and over time, speculators lose to investors.
Conclusion
In conclusion, the beginner investing guide shows there are many different types of investments that we can get into. The thing to keep in mind, though, is how risky they might be and if the potential for loss outweighs the amount you stand to gain.
According to rule 12, we can only recommend: Just start! Preferably with dividend stocks or ETFs . Over time, you will find your own investment approach. Everyone thinks differently and not everyone can invest in the same way. Some cope better with higher volatility, others check the prices of investments every day and just panic.
Try as many things as possible at the beginning. Buy an apartment, buy ETFs, analyze stocks, etc. After two to three years you will notice for yourself what you enjoy most and which strategy you personally get along with best.
