Many people believe investing is for those who have a lot of extra cash and a lot of free time on their hands. But that’s not the case. If you’re able to cover your basic living expenses and have enough money set aside in your emergency fund, you have enough cash to consider dipping your toes in the investment pool.
Of course, as a first-time investor, you probably don’t know where to start and may have a lot of questions keeping you from entering the playing field. To help you out, here’s what you need to know when you’re starting to invest and a few tips to give yourself a head-start.
Don’t wait until you’re older
You may feel hesitant to try your hand in investment opportunities, but it’s best to get started now rather than later. The reason? Compound interest. Compound interest is one of the best ways to see solid returns on your investments, and that interest only goes up as you age. Compound interest is when your account balance grows naturally over time.
Over 1,500 virtual currencies, also called cryptocurrencies, exist in the U.S. and the most well-known cryptocurrency is Bitcoin. Many first-time investors may consider putting their money into cryptocurrencies because it’s one of the most popular investment opportunities they’ve heard of. But cryptocurrencies are incredibly volatile and could land you in high-interest debt.
Consider how much you can realistically invest
How much you ought to invest not only depends on your investment goal and when you need to reach that goal but also how much you can contribute to that goal every month or year. For instance, the U.S. corporate housing industry experienced its fourth consecutive year of growth in 2016 and 84% of those who have invested in real estate have indicated that they will make another real estate investment in the future. Because of the real estate market’s success, you may consider investing in the real estate market yourself.
If you don’t have enough money to invest in commercial property or to maintain that property, it’s not a good idea to try and invest in that industry. Instead, consider buying a REIT, or real estate investment trust. A REIT allows you to invest in real estate without buying physical real estate property.
Know your investment options
Real estate isn’t the only investment opportunity available to you. There are stocks, bonds, mutual funds, and exchange-traded funds you can invest in to make money gradually over time. Consider what your saving goals are and how much money you need to reach those goals to develop an investment strategy. Once you have a strategy, you can look more closely at the investment opportunities available to you.
Getting started in investing may seem overwhelming at first, but the more you learn about it and the more experience you gain, the better you’ll get at creating an investment strategy and the more money you’ll make in the long run.