Skip to main content

Search

How To Invest As A Beginner

Bitcoin is not the answer for beginner investors. The wide world of investing can be challenging to decipher and a little daunting when trying to figure out all of the options on the market. Some beginner investors start with a savings account to get a taste of what earning a return on their income could be in the future. With a savings account, you earn interest on what you put into it, resulting in compound interest from month to month. Savings accounts can be good for saving for a goal like a car or a vacation. A savings account is also reasonable for short-term goals where you're not looking to make a big profit. So, how do you make a more significant profit through investing? 

Daytrading bitcoins financial markets at a coffeeshop
Photo by Austin Distel on Unsplash

What's the Difference Between Saving and Investing?

When saving your money in a bank, it's protected by the Federal Deposit Insurance Corporation up to a certain amount. The bank does have to be an FDIC-insured bank for you to receive this protection in case the bank fails. When you save your money in a bank, you earn a small amount of interest on your deposits. As you transfer more money into your savings account, you earn compound interest on the money you've deposited from month to month. 
With investing, there's the possibility that you could earn gains on your money, or there's a risk that you could lose your money. Money put into investments does not have guaranteed returns because of the unpredictability of market fluctuations. Predicting a company's sustainability can also be challenging due to unknown financial information not being released in real-time. 

Investment Options 

Stocks - When you purchase a stock, you buy shares of ownership in a company. You can buy a stock split, one stock, or numerous stocks in a company. Stock splits are used if you don't have the funds to purchase an entire stock. Owning company stock means that you own a percentage of the company itself. 

Bonds - With bonds, you loan your money to a company or the government in return for interest. The most popular type of bond is a savings bond. These come in EE or I series bonds. You can purchase these independently or when filing your tax return. Savings bonds can also be purchased as gifts for children. 

See What are Savings Bonds to learn more.

Retirement Accounts - There are many types of retirement accounts available. A few options are a 401(k), 403(b), IRA, or Roth IRA. You can invest in these independently or through your employer, and there are pre-tax and post-tax options. Pre-tax means that you will pay less in tax now on your contributions and income. When you reach retirement age and decide to withdraw your funds, you will pay taxes on the distributions. Post-tax means that you've already paid taxes on your investments.

Invest Early

It's essential to invest early in your financial future. It's never too late to start contributing to a retirement plan. If you start contributing $100 per month into a retirement account when you're 20, you could have $600K when you turn 65. If you contribute the same amount at age 30, you could have about $310K at 65. So, starting and continuing to contribute to your retirement early makes q big financial difference. 

What's Your Risk Tolerance

It's essential to assess your risk when investing. When you assess your risk, you determine your risk tolerance. When investing, there's the possibility that you may lose money, so understanding, if you have a low, medium, or high-risk tolerance, can help you make the best decisions on what to invest in. A financial planner can also guide you in determining your investing risk tolerance. 

Make A Plan

After assessing your risk tolerance, you want to determine how you want to invest. Do you want to put your money in a savings account, stocks, bonds, your retirement fund, or real estate? And how do you want to portion out your investments? If you are risk-averse and have a lot of debt, you may want to keep your money in a safer option like a savings account. Or, you may pick a combination of two or more investment options. It's essential to weigh your options and plan for your financial future. 

Comments

Popular Posts

6 Things To Do When You Get a Raise

What is one thing someone should do when they earn a big promotion and raise at work?  To help you make the best out of your promotion and raise at work, we asked business leaders this question for their best insights. From expressing gratitude to updating your resume, there are several pieces of advice that may help you make the best use of your promotion and raise at work.  Here are six things to do when you get a raise: Express Gratitude Make Smart Decisions Avoid The Trap of Overspending Improve Your Quality of Life Adjust Your Monthly Savings Update Your Resume Express Gratitude The concepts of the self-made man and overnight success have begun to unravel as professionals start to recognize the contributions of others. After a big win, it’s tempting for hard-chargers to set the next goal, but allow yourself a moment of reflection. Consider what you learned from the victory and who helped you along the way. Then, thank them and commit to repaying the kindness. Mentors move mountain

4 Ways To Save For Retirement as a Tipped Employee

How can you save for retirement while working in a tipped position with no benefits?  To help you save for retirement as a tipped employee, we asked thought leaders this question for their best insights. From exploring tax-advantaged plans to tapping the features of cash value life insurance, there are practical options that may help you save long-term for retirement.  Here are four ways to save for retirement as a tipped employee: Set Up 401(k) and Invest in ESPPs and ESOPs Limit Spending and Save Explore Tax-Advantaged Plans and Related Options Tap The Features of Cash Value Life Insurance Explore Tax-Advantaged Plans and Related Options No access to an employer-sponsored retirement plan like a 401(k)? You can still contribute to a tax-advantaged retirement plan if your income is documented on a 1099 or W-2. The earned income could allow you to make a tax-deductible contribution to an individual retirement account (IRA). More options exist for those with income reported on a 1099 for

8 Tips To Nail a Virtual Job Interview

What is one tip you have for candidates preparing for a virtual interview? To help you do well in a virtual job interview, we asked hiring managers and experienced recruiters this question for their best advice. From being well-prepared and engaging to maintaining eye contact with the interviewer, there are several pieces of advice that may help you perform well in virtual job interviews. Here are eight tips for nailing virtual job interviews: Be Well-Prepared and Engaging Test Out Your Environment and Technology in Advance Turn Off Notifications On Phone and Computer Speak With Confidence and Be Authentic Write Down Things To Refer To During The Interview Focus On the Fundamentals Show Interest and Stay Engaged Maintain Eye Contact With The Interviewer Be Well-Prepared and Engaging  Stay in the moment for a virtual interview. Though “stay in the moment” might seem cliche or vague, this adage encapsulates patience and awareness and works best with deep breathing. Research, practice, an