Figuring out how to invest money profitably in 2019 in order to effectively set yourself up for future success can sometimes be a real challenge.
There’s certainly no shortage of information on investing available in the digital age, however, this glut of information can often be as overwhelming as it is helpful.
This post is just for you:
To help you get a solid grasp of investing in a way that is comprehensive and at the same time not overly complicated, we’ve put together this guide to investing money for beginners.
Outlined below you will find everything you need to know to start investing and begin preparing yourself financially for the future.
How to Invest Money
When figuring out how to invest money, it’s best to start with the basics. These basics include what the goal of investing is as well as where to invest money.
Investing Money for Beginners
When you invest money, what you are doing is either buying a portion of a company or a commodity with the belief that the value of that company or commodity will grow over time.
Investing is not a get-rich-quick scheme, but rather a way to consistently grow the wealth you already have. The good news is that even though investing is a way to grow your wealth, you don’t have to have a lot of money to get started.
Compounding interest dictates that even small sums of money can be turned into fortunes over time, providing you select the right investments.
Where Should I Invest Money?
When deciding where you should invest your money, you’ve got plenty of options. These options include:
1. The Stock Market
The most common and arguably most beneficial place for an investor to put their money is into the stock market.
When you buy a stock, you will then own a small portion of the company you bought into.
When the company profits, they may pay you a portion of those profits in dividends based on how many shares of stock you own.
When the value of the company grows over time, so do the price of the shares you own, meaning that you can sell them at a later date for a profit.
Other investment options include:
2. Investment Bonds
When you purchase a bond, you are essentially loaning money to either a company or the government (for US investors, this is typically the US government, though you can buy foreign bonds as well).
The government or company selling you the bond will then pay you interest on the “loan” over the duration of the bond’s lifecycle.
Bonds are typically considered ‘less risky’ than stocks, however, their potential for returns is much lower as well.
3. Mutual Funds
Rather than buying a single stock, mutual funds enable you to buy a basket of stocks in one purchase. The stocks in a mutual fund are typically chosen and managed by a mutual fund manager.
But here’s the kicker:
These mutual fund managers charge a percentage based fee when you invest in their mutual fund.
Most of the time, this fee makes it difficult for investors to beat the market when they invest in mutual funds. Also, most mutual fund investors don’t actually ever beat the stock market.
4. Savings Accounts
By far, the least risky way (and probably the worst way) to invest your money is to put it in a savings account and allow it to collect interest.
However, as is usually the case, low risk means low returns. The risk when putting your money into a savings account is negligible, and typically, there are little to no returns.
Still, savings accounts play a role in investing as they allow you to stockpile a risk-free sum of cash that you can use to purchase other investments or use in emergencies so you don’t touch your other investments.
5. Physical Commodities
Physical commodities are investments that you physically own, such as gold or silver. These physical commodities often serve as a safeguard against hard economic times.