If you want to be successful with your own money, you have to invest it in the right place. You sell your labor and hard work in return for money. You can become wealthy over time if you invest your earned money in the right place.
Putting your first step into the investment world is not an easy decision, you’re surrounded with a lot of conflicts and doubts. But knowing that investment is a very powerful tool to reach your long-term financial goals like retirement or building wealth, all your intimidating doubts flow away. But before making your decision to invest anywhere, it is very important to thoroughly educate yourself and do your research on every aspect of investment, involving the risk factors too. If you want to make a smart investment decision you should understand the different investment options available in the market, what risks they involve and what will be the potential return. Let’s make this daunting task easy for you by unfolding the best investment accounts for beginners, how to start investing with little money, various investment options, recommended books and courses, creating a basic investment plan, and investment platforms with low fees.
How to start investing with little money?
This question may arise in the minds of many people: Can you start investing with little money, and if so, how? For a long time, there has been a myth that you need a large lump sum of money to start investing. However, it is important for you to know that this is not true. In the current market scenario, there are numerous strategies and platforms available that can help you invest with small amounts of money. But the first step you should take is doing your research work and educating yourself with different options such as micro investing platforms, dividend reinvestment plans DRIPs, or exchange traded funds (ETFs) which provide an opportunity to invest with little money in your pocket.
Creating a basic investment plan
If you don’t have a plan, there is a high probability that you won’t be able to successfully achieve your goal. So, it is essential for you to create a well-defined investment plan and follow it.
- Determine Your Investment Goals
- Research and select the right investment option for yourself
- Open an Investment Account
- Carefully monitor and Review Your Investments from time to time
- Always determine your risk tolerance
- Always go for professional advices when you are confused
Investment options for beginners
A mutual fund is a pool of money collected from multiple investors to invest in a diversified portfolio of securities such as stocks, bonds, or a combination of both. This is the best option for beginners who want diversification.
Investing in stocks offers you long-term growth potential. They are also known as shares or equities and give you partial ownership in a company. When you purchase stocks, you become a shareholder, which means you own a portion of the company’s assets and earnings.
When you invest in a bond, you are lending money to the issuer, who could be a government, municipality, or a corporation. In return, the issuer promises to repay the borrowed amount, known as the principal or face value, at a future date called the maturity date. If you don’t want to take a risk this is a good option for you.
Fixed deposits offer you a comprehensive capital protection and a fixed rate of return and are considered safer than mutual funds and equities for beginners. They are a type of investment issued by banks and other financial institutions in which you place a flat sum for a specific length of time and earn a set interest rate. ULIP Plans
Real Estate Investment Trusts (REITs)
Another safe option for beginners can be REITs which allow you to invest in the real estate world without directly owning the property. They are more like an investment company that owns, operates or finances the income generating real estate.REITs often specialize in specific sectors, such as residential, commercial, or industrial properties, and provide dividends to investors.
Best investment accounts for beginners:
This is where you kick start your investment journey and this is one crucial step for all beginners as this is where your foundation will be set, and you’ll reach a step closer to your goal. Choosing the right investment account that goes with your long-term goals will result in making a successful investment.
High-yield savings account (HYSA)
If this is your first time investing and you’re intimidated with the thoughts of potential risks of it, you should consider opening a High-yield savings account which will give priority to the safety of your money and will provide higher returns on your savings without the exposure to market volatility.
Individual Retirement Accounts (IRAs)
As a first-time investor if you’re looking to save for your retirement you can go for Traditional and Roth IRAs. These accounts will provide you with significant tax benefits. Traditional IRAs will provide you with tax-deferred growth that means you need not to pay taxes on the contributions upfront but will have to pay tax on the time of withdrawals in retirement. And Roth IRAs will offer you tax-free growth and tax-free withdrawals in retirement.
Many employers offer a 401(k) plan, this can become a great starting point for your first-time investment. With this your employer will hold back a certain amount of your salary as a contribution to your 401(k) account. Depending on your account the contribution can be pre-tax or post-tax. This significantly turns out to be boosting your savings.
Short-term certificates of deposit (CD)
A certificate of deposit is a type of fixed-term savings account that tends to offer a higher percentage yield in comparison to a traditional savings account. When you go for a CD account a certain amount of money for an agreed-upon period which is known as ‘term’. This term can range between 6 months and 5 years. And during this agreed term you are not allowed to access your funds and if you do so you must pay the penalty. You can successfully withdraw your money after your CD reaches maturity you can also deposit it into a new fund.
Brokerage accounts are the best option for you when you want flexibility and control over your investment decisions. These accounts allow the investors to buy and sell an exclusive and wide range of investments that includes stocks, bonds, mutual funds, and ETFs.
Money market accounts (MMA)
Money market accounts is a savings account which comes with a higher annual percentage yield (APY) and low risks. MMAs come along with plenty of benefits such as debit card access or check-writing capabilities which in turn gives you the power to access your funds when needed. By choosing a money market account, you can make a smart decision to grasp maximum benefit for going to a stable and secure account ,while still earning a higher yield on your deposited funds.
Investment books for beginners
The universe of Investment is complex and comes with a lot of risks, so it is very important to educate yourself about all the aspects of investment to make an informed decision. Some of the best investment books to start your journey with:
- Richer, Wiser, Happier: How the World’s Greatest Investors Win in Markets and Life, by William Green
- The Intelligent Investor by Benjamin Graham
- The Little Book That Beats The Market, by Joel Greenblatt
- The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns” by John C. Bogle
- “A Beginner’s Guide to the Stock Market: Everything You Need to Start Making Money Today” by Matthew R. Kratter
Investment courses for beginners
- Stock Market from Scratch for Complete Beginners by Udemy
- Simpler Trading by Simpler Trading
- Financial Markets by Yale University (Coursera)
- Investing 101: The Complete Online Investing Course by Wealthy Education
- Ultimate Stock Market Investing by Udemy
Investment platforms with low fees for beginners
- TD Ameritrade
“An investment in knowledge pays the best interest.” – Benjamin Franklin . Investing doesn’t need to be a burden for beginners. You can make your investment journey easy just by educating yourself about different investment options, creating a well-defined investment plan, and choosing the right investment accounts and platforms that suit your needs. Investment is a long-term process which requires patience and discipline but with the right knowledge you can achieve your investment goals successfully.