58% of Americans own at least some stocks. Learning how to properly invest your money can be an intimidating thing when you’ve never done it. You need to familiarize yourself with a lot of lingo, not to mention that putting your hard-earned cash into an unknown entity is a frightening prospect.
To do it correctly and without anxiety, it’s best to learn as much as possible about the basics of investing before starting. Today, we’ll tell you 10 easy ways to invest when you’re a total beginner.
Investing doesn’t have to be scary. Keep reading and get inspired by one of these easy-to-understand investing methods.
1. High-Yield Savings Account
When you’re just starting out, there’s a lot of apprehension toward investing. A high-yield savings account is a great way to invest in an extremely low-risk fashion and quell some of those feelings.
HYSAs give you a higher APY than a normal savings account and you don’t have to worry about specifically choosing what to invest in. You get to maximize your investments without any risk of loss.
Make sure to look at multiple different HYSAs and don’t focus solely on the APY. Pay attention to minimum balances and annual fees as well.
Another simple way to start investing is to invest in yourself. Most employers allow you to put money into a 401(k) retirement account. That is withheld from your paycheck – you don’t even have to do the investing yourself.
Usually, these are pre-tax contributions, so you lower your taxable income now, but pay tax when you withdraw from your retirement plan down the line. Your employer may or may not match your 401(k) contribution, but there’s a maximum annual contribution amount – $22,500 in 2023.
Cryptocurrency has taken the investing world by storm in the last 5 years or so. It’s certainly riskier than the investing methods we’ve discussed thus far, but you can also do it responsibly. Don’t invest solely in crypto, make sure to do your research, and don’t invest what you can’t afford to lose.
Although crypto is generally stable and works outside the bounds of inflation by nature, it’s up and down. Find the right crypto platform and keep an eye on the price of your currency of choice for a while before investing.
For instance, ETH CAD is currently at $2,400, but 5 days ago it was less than $2,300. Understanding the nature of these fluctuations can help you avoid panic buying or selling.
4. Certificate of Deposit
Certificates of deposit (CDs) are similar to HYSAs in that they’re low-risk and allow you to earn more interest on your savings. Where they differ is that a CD is purchased for a specific time frame, so your money is generally sequestered for a longer period of time.
You can choose a 6-month CD, a 1-year, or even a 5-year. The longer your CD, the more interest you’ll make on your investment, but you incur penalties for premature withdrawals. If you purchase your CD via an insured federal bank, a CD is one of the safest investments you can make.
5. Mutual Funds
A mutual fund is a group of investments assembled by professional money managers. Instead of investing in individual stocks, you purchase a share of a mutual fund and the money manager decides where your investment is best placed.
It’s a great way to diversify your investments, which is an important tent of investing. For instance, it’s better to have your money in stocks when you’re young because it can yield more money instantly. As you age, however, you’ll be looking for more stability, so bonds are better.
6. Index Funds
Index funds are similar to mutual funds, but instead of investing in a random group of stocks and bonds, your money is invested into a specific market index. The most popular index is the S&P 500, which is 500 of the wealthiest companies in the country.
These usually have a minimum investment requirement, unlike mutual funds. If you use certain brokerage platforms, you may be able to avoid the minimum investment situation, however.
7. Exchange Traded Funds
Exchange-traded funds are similar to index funds in that they’re also purchased within a specific index, such as the S&P 500. ETFs are different because the stocks are bought and sold throughout the day at sliding share prices, which makes them similar to traditional stocks in some ways. They’re also really affordable to purchase and manage.
8. Money Market Accounts
A money market account is yet another form of low-risk investment that gives you a better yield than a traditional savings account. You also get other perks, like cheque writing and debit cards, so you can take out money without incurring any penalties.
9. Investment Apps
Nowadays, there are countless resources available to make it easy for beginners to get into investing. In particular, investment apps allow people to connect to their bank accounts and choose their investments with a few button clicks.
Robinhood, Wealthsimple, and Betterment are just a few examples of the many investment apps available. This method is great because you can try investing out with no real pressure and with as little or as much money as you want to start out.
Many of these investment apps are also equipped with tools called “robo advisors”. Using algorithms, a robot advisor analyzes real-time data to manage your investments for a low cost compared to human money managers.
10. Real Estate Investing
Another great option is to invest in real estate. Whether you’ve accrued the capital to purchase your own property or you invest in a REIT, property is a great way to diversify your portfolio.
Property is also fantastic for your long-term wealth. You can choose to rent a property out, flip it, or hang onto it and let it grow over time.
Choose Your Own Ways to Invest
Learning how to invest doesn’t have to result in lost money. Any of these methods of investing are great options for beginners and seasoned investors alike. Choose the ways to invest that make the most sense for your financial situation and get started on your investing journey today.
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