If you think that investment always needs a huge amount of money to start, it's not always the case. You too have a chance to give it a try. There are some Investment options that are not complicated or fussy.
I'm sure you're already trying to do a careful and thorough research before signing your investment plan. But you can ask the broker agents as many times as you like once you pay a small consultation fee. It's just an adequate preparation, and you won't have to waste your time worrying about it after the plan's set up. Plus, there are some pretty basic and simple (but effective) investment tips to help you get started.
Did You Know?
- Average Stock Market Return: The S&P 500 has averaged an annual return of about 10% over the past 90 years.
- Savings Rate: The average American saves around 7.6% of their income.
- Emergency Fund: 39% of Americans would struggle to cover a $400 emergency expense.
- Starting Age: Starting to invest at age 25 vs. 35 can result in nearly twice as much savings by retirement.
- Compound Interest: Investing $100 per month at an 8% annual return can grow to over $150,000 in 30 years.
The Initial Steps
The first thing that you should do is...start considering a long-term investment now. Get involved with a reputable investing plan while you're young. If you think, "I’m still young. Let me start when I get older." Many financial experts believe that starting early is the key to fruitful retirement years. Many people who have done this manage to find a reasonable wealth and achieve well financial balance (and comfort) during their retirement period.
You are never too young to start investing. Whether you are in high school or you are a college student, you can start contributing small amount every month. Then scale it up later on as your career progresses. It may take a little dedication and determination to start, but you'll soon learn how to keep your monthly outgoings under control and maintain this lifestyle.
It's not just a practical reason - earning extra money to make your life comfortable, but the whole experience will give you a confidence as an investor. You will gain knowledge and perhaps some jargons (although you don't have to), which will never be wasted.
Set Your Investment Goal
Second, you need to set your investment goal. Keep in mind that people have different styles or preference when it comes to investing. Some people would like an unstable but huge profit while some prefer the stable but with only little profit. Some prefer the long-term type while others the short-term one. Before starting off, you need to determine and decide on your investment goal.
- What do you want to accomplish?
- Which method do you prefer?
- What types of investment do you like?
Don’t forget to factor in your financial condition, personal circumstances, capital appreciation, age, income, and also capital safety.
Did You Know?
- Roth IRA: The contribution limit for a Roth IRA in 2024 is $6,500 for those under 50.
- 401(k) Participation: About 68% of workers have access to a 401(k) plan.
- ETF Popularity: ETFs have grown to manage over $5 trillion in assets in the U.S. as of 2023.
- Low-Cost Index Funds: Vanguard's Total Stock Market Index Fund has an expense ratio of just 0.04%.
- Dollar-Cost Averaging: Investing the same amount regularly can reduce the impact of market volatility.
Automatic Investment Plan
An automatic investment plan (AIP) is where you arrange the funds to be transferred automatically from your salary or from your bank account to your investment account at regular intervals.
Make your investment plan automatic in order to remain consistent and avoid stalling. It should be made on a monthly basis and you should arrange the withdrawal date on your pay day as long as you meet the required total contribution every quarterly or year. If the condition is not met, you can be charged with a penalty fee.
You might be thinking, that won't be a big deal. You can manage your own finance, monitor it regularly in traditional way. When you get paid your salary, divide the portion by needs or categories, set certain amount aside and invest it. But you know what? The traditional system is prone to failure because it is so easy to make emotional decisions from time to time.
You might be tempted to spend it when there's an urgent need, instead of setting aside the money. That’s why you should have an automatic arrangement so you can make a consistent investment without stalling.
Find an Independent Financial Adviser
One of the safest options is to seek for a professional advice. But not from advisers who recommend particular investment plans because they are most likely to work for commissions. Nothing malicious in that respect, they may recommend what they believe to be the best. But their opinions are not totally unbiased. Don't be fooled by their self acclaimed trustworthiness; words such as;
"I've been in this business for 20 years."
"I'm also a certified accountant."
"I've worked for (a reputable company name)."
Many independent financial advisers can offer advice on any types of investment products. You'll have to pay a fee but you'll be protected from buying unsuitable schemes. Also some schemes are only available through an adviser. If you think the adviser's fee is part of the investment, or as an insurance, it's definitely worth paying for.
Did You Know?
- Inflation Rate: The average annual inflation rate in the U.S. has been around 3.2% over the past 100 years.
- Robo-Advisors: Robo-advisors manage over $1 trillion in assets globally as of 2023.
- Diversification: Diversifying your portfolio can reduce risk by up to 40%.
- Minimum Investment: Some online brokers allow you to start investing with as little as $1.
- Financial Literacy: Only 57% of adults in the U.S. are considered financially literate.
Available Investments for Beginners with Limited Funds
Mutual Funds
Mutual funds allow you to invest in a portfolio of stocks (different types of investment) with a single transaction. Your money will be pooled with other investors' money and will be managed professionally, so it's great for people with less knowledge or those who don't have time to research individual stocks.
Dividend Reinvestment Plan (DRIP)
First you can buy some shares (or even a single share) of a company's stock, and with DRIP plan, the company will give you an option to reinvest any dividends automatically by purchasing additional shares.
Exchange Traded Funds (ETF's)
ETF is classed as trading rather than investment because it allows you to purchase and sell throughout the day. ETF's are traded on the market rather than individual stocks. Lower fees but higher risks.
Careful Considerations and Planning
Always check your finance;
- Be logical about how much you want to invest.
- Always leave enough money for monthly loan payments, utility bills, etc.
- Even with the funds, you can’t put them all for investment.
- Don’t forget that investment does have its own risks.
- Be sure to leave yourself enough money and think about how much you are willing to lose – in case such an unfortunate event happens.
Be sure to tread the water carefully – don’t rush things. Learn along the way and you can expect a fruitful result.
Did You Know You Already Have A LOT To Sell?
So What's Your Problem?
