HomeUncategorizedTo pay debts or to invest? What about both?

To pay debts or to invest? What about both?

There is no sense to once again emphasize how important it is to invest – after all, making your money work for you is a fundamental principle of personal money management. One of the biggest obstacles one may face while deciding to start investing is the debt. In today’s world, it is hardly possible to avoid debts at all – even if you are not going to buy a house or a car, you may still need a student loan or a credit card. Whether to invest or to pay off a debt is actually one of the most common finance-related dilemmas. Isn’t it better just to avoid it, taking into account it will probably never be solved?

Large-scale investments are definitely not a good option for those who are deep in debt. After all, investments are always accompanied with some risk, which is why they may potentially bring to even larger debts. In view of this, it would be much wiser to start with small-scale investments, especially if you don’t have any substantial experience in this field.

What do you know about DRIPS? If you need a precise definition, you may find it here, while in a few words these are dividend reinvestment plans. The main idea is to invest SMALL amounts of money into dividend-paying stocks. In practice this means that you directly purchase stocks from one or a couple of companies, let it be Coca-Cola, Home Depot, GE, etc. (the list is really large), receive dividends and reinvest them. The main thing is to make such reinvestments regularly. This requires commitment and patience – if you have them, time will definitely show your efforts were not in vain.

ETFs, or exchange traded funds, are another option. These are financial products that track the performance of a certain sector (like indices, commodities, bonds, or baskets of assets) of the investment market. Depending on its type, to buy only one share of an ETF through a broker may be enough to track the performance of the total bond or stock market. Besides, depending on the underlying assets your ETF owns, you may receive dividends (if these are stocks), money from interest income (if this is a bond fund) or property-related income (if the ETF has made an investment into real estate). The Vanguard Group, one of the largest investment management companies in the US, would be a good place to begin.

Finally, the third variant is online trading – in case you choose an appropriate approach, the returns may be indeed high and quick. It’s better to remember, however, that this method of income generation is quite risky, which is why risk management should become your highest priority. In view of this, special attention should be paid to high frequency trading – its biggest advantage is that you ALWAYS know how may you may gain or lose, which means that risks always remain under control. Apart from this, stakes may be as small as $25, which is very essential in case you are in debts. Where to find high frequency trading broker? Founded in 1983, Glenmore Investments may become a perfect start.

You think you don’t have money even to start? This is actually an excuse, but not a fact. If you start saving on morning coffee in Starbucks or fast food, you will see that the situation is not that tragic. So trust in yourself and don’t give up!



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