It’s not uncommon for people to avoid investing for a myriad of reasons; it’s too expensive, there’s too much risk involved, you aren’t familiar with the market enough to try your hand at it. And these are all, to some degree, valid. Let’s face it, investing money blindly can be a bit of a crap shoot. With some choices, you are guaranteed to profit from the investments. However, you may also run the risk of losing a small fortune. Then there’s the danger of dishonest or incompetent investors.
What little the average person knows about the stock market often comes from film. For instance, the evils and corruption of the market has been well-documented in films like Martin Scorcese’s The Wolf of Wall Street. The world of the stock market, particularly after the great crash of 2008, is one full of peril and uncertainty.
There are ways, however, to safely invest your money, even when you don’t have that much to play with. Here are six money investment tips that even the simplest of investors can understand:
1. Make An Investment Plan
Before you make any investment decisions, there are a number of factors to consider. First, you need to consider what your ultimate goals are. Once you judge your willingness to risk, you’ll want to know exactly how soon you’ll want your investments to pay off. This will vary from person to person – if you’re putting a down payment on a house, for instance, or saving for your pension many years down the line.
Ultimately, the decision is up to you, but having some sort of general plan going forward is going to help you which product is most suitable for your portfolio.
2. The Cookie Jar
Saving money and investing obviously walk hand-in-hand, as one naturally needs to have a few extra bucks to play the stock market. If you’ve never been much of a saver, however, this can prove quite difficult and the risk is higher than ever. Fortunately, one can start fairly simply. Just by putting away ten dollars a week in a shoe box, over time, will create a fund for future investment.
But these days, it’s not as common to walk around with physical cash. If this is the case, one can do the same electronically. An online savings account independent of your checking account can be set up. The money can be withdrawn within two days, creating a bit of a stop gap that will prevent you from spending it.
3. Roboadvisors
We are, at heart, naturally afraid of bots playing around with our personal funds. But there are plenty of reliable roboadvisors – that is, bots created to make investing as easy and safe as possible – currently on the market. Set up is relatively painless, and no experience is necessary.
Wealthfront is one of the most commonly used, with a reasonable fee set at .25 per cent. Better still, the first $5000 you put up are managed free. The system requires $500 to first start up, but it’s one of the best reviewed roboadvisors on the web.
If you can’t meet the $500 that Wealthfront demands, M1’s starting balance is only $100 and charges no commissions or management fees.
4. Employer’s Retirement Plan
Those with a tight budget may be unable to enroll even in a 401(k) or other employee benefits. However, one can simply donate just one per cent of their salary to an employee retirement plan. It’s a contribution so small you won’t even miss, and in this day and age it’s never too early to start planning for your later years.
Once you have said contribution in place, you can slowly increase the percentage over the years. With a long term employer, you’ll have invested in a safety net for when you finally hand in your papers.
5. Diversify the Investments
A general rule of thumb in investing is that to improve your chances of success, you have to accept a certain amount of risk. Managing risk can be handled by spreading a wide net. If one fails, another may succeed.
6. Decide Your Personal Involvement In Investments
Managing your investments is another area where many decisions can be made. If you are, for instance, someone who enjoys risk and the general market game, a hands-on approach is best – so long as you have a clear understanding of the risks involved.
If you are less certain about the inner-workings of the market or don’t have the time to devote to your personal finances, you might find someone to handle your investments or pool your funds in with a group of other investors. Whatever you decide, the risks one takes can decide both their immediate future and long term goals.