Ben Franklin once said, “The money that money earns, earns money.”
For those who are newbies, investing can be defined as putting money into something where you can expect a return over time – aka, “making money as you sleep” – the best way to make money, am I right? The goal of investing is maximizing your return and minimizing risk.
Two common myths about investing is that investing is super complicated, or investing is the same as gambling.
The goal of investing is quite simple – to maximize return and minimize risk, and while some investments are like gambling, you can find things to invest in that are very safe and will offer almost guaranteed returns. You can also control the amount of risk you take with investments.
While the three most secure investments are stocks, bonds, and real estate, it’s smart to diversify your portfolio and invest in a variety of things that you expect to go up over time.
How to Start Investing and Making Money
- Figure out how much you can afford to invest
- Pay yourself first – meaning, invest as much as you can each month because your future self will thank you for it
- Great companies to invest in for beginners who may not be looking to invest thousands yet are Apple, Disney, and Costco
- Your “savings rate” is the percentage of your income that you invest – and the higher it is, the earlier you’ll be able to retire. So try to get your savings rate up as high as you can
Separate your short-term investment strategies from your long-term investment strategies
- Don’t put all of your investments into the same accounts, there is a difference between short-term and long-term investing
- Short-term investments are for money you’ll want in 5 years or sooner. Rather than keeping your money in a savings account (where you’ll lose money over time due to inflation), invest it – it’s a safer option. You could put your money in a high-interest savings account or a certificate of deposit account
- Long-term investments are for money you’ll want in 10 years or more, so likely your retirement money. Two types of retirement accounts include those offered by an employer, and those you sign up for yourself
- Decide how much risk you’re willing to take
- Pick what goes into your long term retirement investment accounts
- Invest as much as you can in tax-advantaged accounts
Minimize taxes as much as possible
- Invest early, often, and as much as possible
- Track your investments and net worth
- Apps such as Personal Capital will allow you to do this
The hardest part is starting — investing may seem intimidating at first, but at https://investorsscene.com, we want to help you through every step of making money. Check out our other blog posts for more investing tips and companies we’ve got our eye on right now.