Stocks and bonds may be what come to mind when you think of investing. You may not know much more than that about investments but you are interested in finding a way that your money can help you earn more. While all investments carry some risk, some are safer than others and would be a great place for beginners to start their portfolio.
Get your finances in order before you begin investing so that the money you spend on an investment is not needed for daily living. Once that is accomplished, you can begin finding new ways to make your money work for you.
Certificate of Deposit
A certificate of deposit or CD is a great investment for beginners even though it has a low return on investment. You do have some control over how much money you make with a CD by the choices you make. A CD is a deposit that you make with a financial institution for a specified period of time that can vary.
You are paid a rate of return on this CD based on the current rate for that length of time. Generally, longer-term CDs pay better than short-term ones, but that can vary.
You will find CD products for as little as three months or five or ten years. Once the CD has matured, you can either be paid out or have it rolled over for another term. You can also have the interest rate added to the CD or paid to you during the term.
A person should almost always invest in this retirement plan before beginning other types of investments. This is an investment in the future with a good rate of return, especially if you have an employer-matching fund. You can choose the type of fund you want for your investment based on the level of risk you are willing to maintain.
When you are in your 20s and 30s, you can put your 401k in riskier investments with a higher level of return. As you get closer to retirement age, you will want to move more of your fund to a safer level of risk. These investments are usually managed by a firm that your employer has chosen and you can either leave everything to them or you can watch your own portfolio and manage it as needed.
It’s best not to mess with it too much since fluctuations are normal for this type of investment and usually level out over time.
Bonds are often created by organizations such as charities, churches, and government to fund projects. It is basically a long-term loan for the company that they have to pay back at the end of the term. While ratings on bonds can vary from extremely safe in AAA bonds to CCC with probable default, they are generally a safe investment as long as you stick with the right ratings.
Bonds have a good rate of return once they have matured. The only issue some investors may have is that they can take a long time to mature; however, they also require a small investment, which is a great benefit for beginners.
This type of fund is a mixture of stocks, bonds, and other securities in a portfolio. The difference between establishing a mutual fund and creating these investments on your own is that the mutual funds are managed by an investment professional. This allows you to have a diversified portfolio without selecting the individual accounts.
You also don’t need a lot of money to invest in this type of fund and can begin with just a few hundred dollars.
You can choose between many categories of funds. Some companies work with growth funds that buy shares in new companies with strong growth potential. They may also choose to work with shares of companies in a specific market such as health care or technology. You may also work with a company that only invests in stocks of a certain index.
When choosing a company to work with, look at the fees they charge for managing your fund. This fee is used to cover their expenses as well as helping them make a profit. However, you do not want to give up too much of your money to fees so you should compare companies to find the best deal.
The idea of investing in stocks can scare a new investor. They think of stock market crashes and major losses, but the stock market can be fairly safe with the right investment choices. You can work with an investor and let them help you make the best decisions for your level of risk.
If you want some control over which stocks to pick, stick with well-known companies that have a solid reputation. Wait until you have more experience with investing in general and the stock market in particular before you look at new or unknown companies.
While it can be tempting to find that one company that will be a breakout, the risk is much greater than with a company that has a strong record.
When looking at places to invest your money, you will have to consider how much risk you can tolerate and how much money you have to invest. You should also learn the basics about each investment option that you work with even if you have someone managing the money for you.
Never leave the control of your money in someone else’s hands. On the other hand, don’t be too quick to jump out of an investment if it is not doing what you want it to. All investments have off-times and you want to look at the long-term picture.
Investing doesn’t have to be a scary concept; beginners can make money with their money with the right information and education. If this is your first foray into investing, choose safe options that you understand and feel comfortable working with. Don’t expect to get rich, but do expect to learn a lot that you can apply to other investments in the future.