Investing part of your income is a great way to generate income from your unused savings and earn some extra money on the side.
But starting out with investments can be hard when you’re a beginner, and you might not even know where to start.
Luckily, we’ve done all the hard work for you and made this handy guide to help you get started as an investor!
So let’s jump right into it and look at the basics of investing!
Getting Started With Investments
Before you can start investing your hard-earned money, there are several things you need to consider.
While investing part of your savings is a great way to generate passive income (see also ‘How To Make Your Money Work For You‘), there is always some level of risk involved.
Knowing the basics of where to invest, how much you’re willing to invest, and how you want your money to be invested is the best way to protect your investment and grow your savings in the way that’s right for you.
Let’s take a look at some of the things you need to consider when you’re investing.
How Much Should You Invest?
The first thing you might be thinking about when investing is how much you should actually be putting in.
Many people think that you need to invest a large sum in one go in order to profit from it, but that’s actually not the case. Starting a portfolio doesn’t mean you have to put all your savings into it, and most investment portfolios will let you start out with as little as $100.
When you’re just starting out, it’s best to start small. As we mentioned earlier, investing comes with some risks, so you’re better off getting some experience with smaller investments before moving on to larger ones.
It’s always a good idea to keep some money aside in case you need it – this is called an emergency fund, and it should cover at least 6 months of expenses to make sure you have some financial security. It’s always important to ensure you never invest more than you can afford to lose if things go wrong.
How Should You Invest Your Money?
You have two main options when it comes to investing: passive investments and cumulative investments.
As their name suggests, passive investments let you build a portfolio that generates income without having to be actively involved with your investment all the time.
This approach takes far less effort as you don’t have to constantly manage your portfolio and track the ups and downs of the market; instead, your money is managed by someone else, such as through a mutual fund.
However, your investment will still generate good results in the long-term and has a lower risk of falling through.
This makes passive investing a great choice for beginner investors, and is a good option for investing small sums more securely.
Meanwhile, cumulative investments are more complicated, and you’ll need to do plenty of research into the best investment options beforehand. This is a more hands-on approach, meaning you’ll need to be managing your investments on a regular basis to keep track of the market.
With that being said, though, cumulative investments typically see greater returns (see also ‘How To Invest $500 Dollars For A Quick Return‘) both in the short term and the long term.
Money made from your portfolio is reinvested until you take it out, meaning that your potential profits will increase exponentially as long as you properly analyze the markets you’re invested in.
Otherwise, you can lose a much larger amount in a dramatic dip – higher risk, higher reward.
Both styles of investing have their benefits and drawbacks, and it’s really up to you to decide which approach works for you. Weigh up your options before investing and you’ll be able to reap the most from your portfolio.
Starting Your Portfolio
Okay, so you’ve taken a look at what you want your portfolio to look like – now all you need to do is actually start investing!
There are several options for where to invest, from mutual fund investments (see also ‘How To Start An Investment Fund‘) to personal portfolios. After you’ve chosen where you want to invest, you can start building your portfolio and reaping the rewards.
Managing an investment portfolio might seem intimidating at first, but options like passive investment reduce the risk of losses and make it easy to manage your investments in the way that’s right for you.
From there, it’s a matter of choosing what you want to invest in, and keeping track of the markets to help you know when and where to move your money to.
Starting an investment can be a daunting task, but it’s simple enough once you know what you’re doing.
Choosing the best investment options for you is the best way to help your investment grow, from picking the right style of investment to the amount you want to invest.
Using this guide, you’ll be well on your way to building your portfolio – now all you need to do is make the leap! Good luck!