MD Investing money for beginners can be tough and challenging — learn everything you need to know about investments when you are a full ignoramus
MT The most proven ways to invest money for total newbies
Sooner or later, nearly everyone comes to the thought that it would be good to invest in something to have a good and secure passive income. If you have also come up with that idea, now, you face the problem of what the best way for investing money is. In major cases, the best way to start is to decide what assets you would like to own, for instance, stocks, bonds, or real estate. Each of them has its risks, chances, and tax rules.
Naturally, creating an entire portfolio can be challenging, yet very rewarding. Before you learn how to start a real estate crowdfunding platform, understand that rents, interests, and dividends will bring their fruits promptly. You may lean on different classes of assets depending on what exactly you may need at the moment. The more you live, the more your needs change. At once, your need could be growth but later, you can switch to fixed income. Different asset types can meet these changing needs.
Learn about different assets and what will be the easiest way to invest money depending on your needs at the moment.
Purchasing individual stocks is one of the riskiest methods of investing, especially for newbies. At the same time, this method can be one of the most beneficial. Before you start dealing, it would be good to realize whether there is a sense to buy stocks for you personally. To do this, answer the following questions:
- Are you investing with a long-term perspective?
- Do you really understand the business you invest in?
Investing long-term means at least five years. Understand that being fond of a company and its success doesn’t mean understanding how this business works and benefiting from its stocks, even if it is very successful. Stock prices are being established every single second during the trading day. When owning individual stocks, people often do short-term trading.
There is one nuance though. Stocks are just a share in a real big business. Over time, your assets will grow along with the assets of the company you invested in. If you are sure to have enough experience and patience to cope with all that having only individual stocks, you can go ahead. If not, think about a more diverse income offered by mutual funds or ETFs.
Owning real estate is one of the oldest and most traditional ways of investing and still remains one of the most popular and beneficial ones. Giving your house or land for rent is a great method to get passive revenues. Of course, when you buy a house, it looks more like a huge expense than an investment. However, the price of real estate grows up and falls just like the price of stocks.
You can purchase a house for $90.000 this year and watch its price increase by $130.000 the next year. It means that within one year, your assets will grow by $40.000. You will evaluate real estate and find out its capitalization rate to understand what income it may bring you. The capitalization rate can be calculated by dividing the property’s net operating income by its current market value.
You can also buy a house to give it for rent to families who cannot afford a loan to buy their own accommodation. A lease-purchase contract is an agreement between a buyer and a seller. An option fee is paid by the buyer. It will allow the buyer to have a right to buy the house later at an established price. The seller gives the house for rent until it is purchased to earn money on rent and sales.
If you buy several houses and give them for rent following a lease-to-own agreement to families, your cape rate will be 13% after adjusting to taxes and maintenance. It is much better than the 0.10% you would earn from savings bonds. There are other ways to invest money in real estate though. They are called flipping and REIT (real estate investment trusts).
For instance, you buy a house, make it over and renovate and then sell it at a much higher price. This flipping is really widespread in the real-estate area. Lots of people earn from investing together with someone else through different enterprises that do not pay corporate taxes. Such companies are called REITs.
Loans and Lendings
If you have money for investment, you can start lending money. This is one more investment that is as old as mankind. You collect as much money as you can and then give loans to those who need it. Depending on risks and terms, you establish your interest rate. Bonds are also a type of lending but you can give money to enterprises. They pay your interest rate every month and return the borrowed amount at the end of the term.
Depositing money to bank accounts is also one of the investing methods. If you have a certain amount of money and want it to be safe and bring you some revenue, getting a certificate deposit would be probably one of the most efficient ways to do it. Of course, a bank can go bankrupt but in that case, you will have an agreement that will protect your funds.
Such an investment can bring you a very good income depending on the amount you deposit. if it is quite big, your interest will be essential. There is an option of either adding the interest to the amount of your deposit every month or receiving it monthly on your account and using it. The larger your deposit is, the higher your monthly income will be.
Investing money for beginners can be tough but still, you can choose such a safe way as a bank deposit and protect your money or invest in real estate and get constant income from giving it for rent. There are plenty of other investment methods such as cryptocurrency, for example. However, they are not that safe. Just like stock markets, cryptocurrency is vulnerable and you have to watch it all the time not to lose money and sell your currency beneficially.