Investing isn’t just a one and done deal. It’s a lifelong process that requires continued education and the desire to grow, just like your investments. But when you’re just starting out, knowing which investment is best. How you invest in your twenties isn’t necessarily the same as when you reach your forties and beyond. But regardless of age, investing takes a sound strategy and discipline when it comes to saving. Whether you’re saving for that once in a lifetime vacation or your retirement, you need a solid saving strategy. In this article, we’ll discuss some of the most important factors that can influence your investments. We’ll also review which investments you should consider for every stage of life.
Investment Factors
Where you save your money is just as important as the amount. Making regularly scheduled contributions into your savings account is usually the easiest. You can set up automatic transfers with each pay cycle and then add additional funds when possible. However, there are factors you need to consider before you start investing.
Passive Income and Growth
The first factor involves passive income. You need to keep putting money into your chosen method of investments. Beginners should be setting aside at least 10 percent of their income for their investment. Using your primary income to invest is an option, but budgeting around it can be tricky. And if you find yourself face to face with an unexpected expense, it can put a wrench into your investment routine.
Using any passive income is a much better option as it doesn’t conflict with your main expenses. Not only does it make your life easier, it also can help you grow as an investor as well. But make sure not to invest every cent of your passive income, especially as a beginner. You want to take it slow before you start investing more of your hard-earned funds.
The Risks Involved
No matter what type of investment you choose to partake in, there will always be some form of risk involved. Moreover, some types of risks may be more common in specific investments than others. Here’s a quick list of risks to be aware of:
- Credit
- Reinvesting
- Liquidity
- Inflation
- Longevity
- Market
To give you a broader example, let’s take a look at gold. Gold is an investment you don’t hear about as much despite its value. That’s because gold can have a far weaker return on investment than other modern investments.
Granted, that does depend on whether or not you choose to buy physical gold. Gold EFTs, also known as exchange trading funds, are much more valuable and liquid compared to physical gold. There’s also less risk associated with EFTs in general. With physical gold, you have to worry about things, like theft and potentially making additional payments.
If you do decide to take the risk, you’ll want to come into some fast cash. A great way to get your hands on this kind of money is to calculate the cash surrender value of your life insurance. The cash surrender value is what the company pays a policyholder once they cancel their life insurance.
How much you get depends on how much you’ve currently paid and the amount of time that’s passed. Once the initial value is determined, the insurance company will then deduct the surrender fees, which clocks in at about seven to 10 percent on average. This particular process can be a bit more complex to understand than simply selling the policy outright. Reviewing a guide and researching the FAQs can help you better understand how the process works.
You Need to Have a Concrete Plan
Investing requires some planning before you can start. It’s not something you can throw money into and expect it to multiply overnight. You need to have realistic expectations and perform research on your preferred method. Even if you want to trade online yourself you will still need to research tips for beginner online traders before you dive in. Furthermore, you really need to take a look at your current financial situation. If you're not able to safely invest, then it's best to wait until you can. Another part of your plan should be about what you hope to get out of investing. What's the reason behind your decision to invest? What will you use the money for? Having this information figured out gives you a goal to strive for.
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What Age Should I Start Investing At?
This is a question that’s commonly asked among many investors to be. The truth of the matter is that you can start investing at any age. You don’t need to be a business tycoon to be a successful investor. The reason why people suggest that you start investing at an early age is because of the numerous benefits you can receive in the future.
The most obvious benefit is the increase in value as the years go by. You see, the thing with investments is that it’s a bit of a slow process. Don’t pay too much mind to some of those stocks that’s seen a massive boost in value. It’s luck and nothing else. If it happens to you, that’s fantastic. But in almost all cases, increasing the value of your investment takes time.
Those in their 40s and 50s may not have a two-decade head start, but does that mean they can’t invest? No, far from it. Some may not even be able to participate in investments due to life changes, like getting a new job and having a child.
You need to be diligent about how you go about this. It is recommended to play it safe by going into the stock market or bonds. Bonds are ideal for older adults because of how much money you can save. Stocks are a bit riskier, but at the same time, you can potentially see a large return on investment. Ultimately, the choice is up to you. Just remember to really weigh the pros and cons of each option before making your decision.
