As a beginner, it’s easy to be overwhelmed when it comes to investing in the stock market. This guide will help you to navigate that space comfortably. To get started, it is important to understand that money sitting in the bank does you no good.
For starters, consider saving as a means of getting you started on an investment. Once you have saved up enough to let you jump in on an investment, however small, don’t let that money sit in the bank.
What is investing?
Investing is simply making a purchase that is anticipated to give you a profit sometime in the future. Traditional investments could range from purchasing real estate assets, owning a business, or lending money to a company or person with the goal of gaining interest payments.
Do I need to invest?
Yes, you need to invest. Saving money is the first step towards accumulating something to put in an investment, but in itself, saving cannot build you significant wealth. Think of investing as the way in which you get to multiply or add on to your savings.
A dollar in the bank today will only earn you a little more tomorrow. While investing the same amount of dollars could earn you much in the future, investing money goes to work and earns you more dollars.
The effect of this is that your assets grow and rise above the inflation rate. While savings might simply decline in value, with investments, savings simply build on themselves as opposed to declining.
At what point to start investing?
Investing for beginners is the way to go. That means everybody has to start somewhere, and if you’re wondering when to start, the answer was yesterday. Well, it is not too late if that didn’t happen already.
Start when you have a good financial base. It’s best to consider investing if you’re free from any high-interest debt. Ensure that you have a goal in mind and create an emergency fund for yourself. With these, you’ll be off to a good start.
Having a goal cushions you from the fluctuations in the market, allowing you to let your money run in the investment for the long term.
- Start investing at a young age
If you’re young and reading this, then read on. If age seems to have caught up with you, well, it’s never too late. Investments are premised on the compounding factor, which depends on time to ensure growth.
That means the earlier you get started, the more wealth you get to accumulate even with a minimum principal amount. In addition, this allows you more time to let your money recover its value after a harsh economic downturn.
- Create an emergency fund
Investments take time to mature and bring desirable results. That means you need to ensure that once you have that money in, you will not be eyeing it back for a long time.
This means that having an emergency fund will help you handle any tough financial times without having to feel the need to pull out from your investment.
- Clear off your high-interest debts
When it comes to investing for beginners, this is an important tip. Clearing off your debts is a good investment by itself. Piling up debts will only tear you down financially. Seeing that debts only accumulate interest, high-interest debts could, therefore, be even more catastrophic.
Do not put money aside for an investment without clearing such debts first; they will only slow you down in the process, causing you to even give up on your investments.
What amount should I start with?
The important thing when it comes to investing is starting now. It is important to dream big but it’s equally important to start as soon as you can. Starting small allows you to watch the potential of your investment grow.
For instance, for someone at the age of 25, starting with $500 can seem like an insignificant amount to make them wealthy. However, assuming that they added $50 to it every month after; that would get them to almost $174,000 by the time they retire.
If they choose to wait until they are 35 so that they can accumulate double the principal amount to start investing, then that would only give them a fraction of the $174,000 by the time they are retiring.
If starting small makes a significant difference, especially if it means investing sooner; then go for it. You won’t regret your decision when you reap your rewards.