Many people think about investing – investing money in order to make a profit in the future. Usually such goals are aimed at long-term income, so that the capital worked for the person, was preserved and increased in a passive way. How to do this and where to start, tell financial experts.
Ilya Buturlin, analyst
The first thing aspiring investors should understand is that there is no magic button, which allows to get rich in one day and solve financial problems. Investing is a long journey, in which you should not count on quick results. A prudent investor comes to the exchange market not just to make money, but to keep what he has earned and to multiply it.
Beginners it is better to find like-minded people: in investment clubs, communities, and to study the literature on trading and investing. It is definitely necessary to invest from small sums When beginning investors invest small sums in stocks and bonds of large companies and states, they gain experience faster and learn without serious risks. The easiest thing to do is to buy a stock and a federal bond, in 50/50 proportions, and monitor their dynamics and study the literature. Then you will understand the stock market and be able to invest on your own in the financial markets, without the services of consultants and managers with high commissions. Everyone needs investment skills just as much as knowledge about health and relationships.
Diana Lebedeva, financier, qualified investor
The main thing in investing is regularity and duration, and the amount invested is in third place. The earlier and more disciplined you are in investing, the better results you will achieve. Someone says that there is no money to invest. It’s more likely to be the primary points such as low priority and lack of financial management skills. In fact, you can set aside even $50 a month for future income. Another thing is that people choose to spend it on something else.Before you start investing, you need to get your finances in order: calculate your income and expenses, understand where you spend your money and how much you can save, set financial goals, form a safety cushion, create a strategy for achieving your goals or a personal financial plan. After that, you can move on to investing. You can also take a training course if you want to learn about the topic. Another option is to use the services of a professional financial consultant who will form an investment portfolio and tell you how to act. This will save money and avoid mistakes.
What to invest money in
There is no perfect answer. The best type of investment depends on your investment goals. For example, if you have a relatively high risk tolerance and have the time and desire to research individual stocks (and learn how to do it right), this may be your best tool. If you have a low risk tolerance but want a higher return than a savings account, investing in bonds (or bond funds) may be more appropriate.
You should also understand that each type of investment has its own level of risk, but that risk is often correlated with returns. It’s important to find a balance between maximizing the return on your funds and finding a comfortable level of risk. For example, bonds offer predictable returns with very low risk, but they also offer relatively low returns of about 2-3%. In contrast, stock returns can vary widely depending on the company and time frame, since the entire stock market averages nearly 10% a year. To build an investment portfolio, start with a small amount of money, for example $100. The amount of money you start with is not the most important thing – it’s just making sure that you are financially ready to invest and that you are investing for the future. One important step to take before investing is to create your own safety cushion – an emergency fund. This is cash set aside in a form that allows you to withdraw it quickly.
Investing in a time of need may not be the best solution. An emergency fund is a safety net to avoid that. There is active and passive investing. Both styles have their merits when focused on the long term, but lifestyle, budget, risk tolerance and interests may favor one type.
Investing: what kind of investing there is
Active investing means spending time researching investments on your own and building and maintaining a portfolio. If you plan to buy and sell stocks through an online broker, you can become an active investor. Active investing has the potential for great returns, but you need to spend the time to do it right. You will need three things to do this:
* time – active investing requires a lot of homework. You need to research investment opportunities, do some basic analysis, and keep track of investments after purchase;
*knowledge – constant investment analysis and stock research;
*willingness – you need to spend time investing.
Passive investing is like an airplane on autopilot, not manually steering it. You will get good results in the long run, and less effort is required. This kind of investing involves using money in investment vehicles where the hard work is done by someone else. For example, investing in mutual funds is an example of this strategy. Or you can hire a financial or investment advisor, use a robo-advisor to develop and implement an investment strategy.