Taking good care of your finances is a key component of living a comfortable life. In particular, investing your money is a great way to grow your wealth. By building your finances through sound investments, you can provide for your family’s needs for years, if not generations.
Investing is a broad term and can be approached from multiple perspectives. Perhaps you think of putting your money in the stock market, which is often one of the first investments that people seriously consider. Then again, you can take multiple avenues in investment to strengthen your portfolio.
While good investments can bring you great amounts of wealth, a bad one can easily sap your finances dry. It can be tempting to invest everything into what’s hip in the finance world, but blindly shooting without having a clear idea of what you’re doing can only lead to nowhere.
Knowing where to place your money is critical to finding success with investments. If you’re unsure about where to go with your finances, this piece will enumerate tried-and-tested avenues that can help you build a good investment portfolio.
Best Investment Avenues for Beginners
1. High-yield Savings Accounts
If you’re a newbie, you can easily take on a high-yield savings account as part of your investment options. The biggest reason many beginning investors start their journey with these accounts is their similarity to a typical savings account where you safe-keep your money.
Another thing that makes high-yield savings accounts an ideal place to start your investment journey is the compound interest rates that usually come with these bank products. Also known as the annual percentage yield (APY), these interests exponentially grow any amount that you have saved in your bank.
Your account’s APY will depend on the bank you choose and how much capital you put in. The longer the money sits in your account, both the principal and the interest rate increase. However, withdrawing too frequently from this savings account may incur penalties or account termination.
Funds are another easy point of investment entry. What differentiates this investment option is how it allows you to have a quick portfolio without doing all the research and investing yourself.
There are two kinds of funds you can tap into. An active or multi-asset fund is run by a professional fund manager that does the heavy lifting for the individual buying into the fund. Meanwhile, a passive fund simply follows the trends and has less potential for exponential growth.
The amount of risk that comes with funds depends on the nature of the fund you’re trying to invest in. Beginners who still have a lot of productive years ahead of them can opt for moderately or aggressively risky funds, while people close to retirement are advised to invest in safer funds.
3. Retirement Plans
If your main objective in trying investments is to create a sizeable chest that you can use in later years, a retirement plan can be a good instrument. Since your earning capabilities are limited based on your tenure as an employee, setting aside some of your income for retirement is a financial move usually advised by financial planners.
Private companies may have a retirement fund set for their employees as required by local legislature (R.A. 7641 and R.A. 4917). Employees who have served a specific amount of time for their respective employers are expected to get a retirement package. The package is based on what was agreed upon in the employment contract or collective bargaining agreement.
A good way to add to your retirement funds is to apply for an insurance policy. While you may have heard plenty of insurance myths that steered you away from getting one, investing in it as early as possible can benefit your financial future.
Stocks typically come to people’s minds whenever investments are mentioned. Also known as equities, they enable you to own a part of a particular company’s assets, and their value can easily change.
Stocks are usually traded at a stock exchange, and businesses usually sell these stocks to raise funds for their operations. Buying stocks does not make you own corporations, but the value that your stocks accrue over time makes them viable investment options.
Multiple industries let you buy stocks, and all of them have their own set of risks and rewards. Keeping a close eye on the news and the condition of your stocks will ensure that you get profitable returns on your investments.
If stocks seem unappealing, you may be better off investing in bonds. People who like to participate in bonds usually work with governments and corporations to fund urgent projects.
The government or corporation that gets these bonds can trade them publicly or privately. Multiple factors can affect the bond’s actual market price, such as the issuer’s credit quality, the bond’s length of time, and the coupon rate against the general interest rate environment.
What makes bonds better than stocks and other investment avenues is that income arrives through interest payments. These fixed income investments are great for people approaching retirement, but it’s also a great addition to a young investor’s investment assets.
6. Exchange Traded Funds
An exchange-traded fund (ETF) is a type of investment that can be bought and sold similarly to how most common stocks are dealt. ETFs contain a plethora of investments. Some of the investments listed in this article can be included in an ETF.
ETFs can be dissected further depending on the type of portfolio a beginner investor wants to make. There are bond ETFs, industry ETFs, commodity ETFs, and currency ETFs among others. ETFs usually have lower expense ratios and fewer broker commissions, making them more affordable than individual stocks.
Invest for a Better Future Today
These types of investments are all built to help you create a solid foundation to build your wealth. While each of these ventures has its strengths and weaknesses, ultimately, they help new and experienced investors grow their money.
Investing has something for everyone, and there’s no such thing as getting in too late. Read up on everything that has to do with investment, place your money where you’re most comfortable, and see it grow before your eyes.