Making the decision to invest money can be a very exciting one. In doing so, you’re joining a very small sliver of the population who use their money to try and create more money. However, even though it’s exciting you will probably feel as if you’re venturing off into the unknown.
You’ll likely have a lot of unanswered questions including “where should I actually invest my money”? Luckily, this is a very common question with an easy answer!
Let’s take a look.
What’s your risk tolerance?
Investing money is a constant tug of war between the amount of risk you are willing to take and the size of the reward you can earn. If there was an investment out there that allowed you to double your money with zero risk then everyone in the world would be a millionaire.
This is why it’s important to determine what your individual level of risk is. Are you comfortable risking some of your money in hopes of earning a higher return? Or is your main concern protecting the money that you already have?
Most investors, especially beginners, fall somewhere in the middle. They want to earn a decent return without putting all of their cash on the line. Let’s take a look at some of the assets that are best suited for this type of investor.
Want to learn about finance but don’t know where to start?
Open a retirement account
A retirement account is probably the best place for beginners to start. Retirement accounts are accounts you can open and fill with money that you don’t plan on touching until you’re 65 and ready to retire. The money that you put in these accounts is usually tied to the stock market in some way, shape, or form. This way, your money will slowly grow over the years.
There are a few different types of retirement account that you can open but the main two are:
- 401(k) – This is a retirement account that is offered by your employer. Ask your HR department to see if you are enrolled in your company’s plan. If they don’t offer one then you still have another option.
- Roth IRA – This is a retirement account that you are able to open up by yourself so that you can prepare for retirement in a way that has tax advantages.
Retirement accounts are good for beginners because your money will be invested by a professional. All you have to do is open an account and fund it!
However, if you want to do things yourself, you definitely have other options.
The stock market
The stock market is by far the best place for beginners to start investing. These days, it’s incredibly easy to start investing directly from your phone with as little as $5. Once you have opened up a brokerage account, you will be able to buy/sell any stock that you want. However, we’d recommend looking into index funds. These are like baskets of tons of different stocks that track the return of the entire market over time. Buying index funds is a great way to reduce your risk and increase your chances of making money.
We hope that you’ve found this article valuable when it comes to learning what a beginner should invest in. If you are interested in learning more, please subscribe below to get alerted of new articles as we write them!