If your goal is to have a financially stable life to pay for student loans, settle credit cards, create an emergency fund, build a good credit score, or start a retirement account, then you need to invest. But figuring out how an investment plan can be a real challenge for those inexperienced in investing.
In fact, the World Bank forecasted in June 2020 that the global economy will shrink by 5.2% due to COVID-19. This is the deepest recession since World War II.
Whilst this news is a bit concerning, this should not stop you from investing and gaining financial freedom—especially during these difficult times. That is why we’ve written a guide to help you jumpstart your investment portfolio this 2021.
You may think that saving is like investing. Whilst saving and investing can go hand in hand, they are very different from each other. Saving means putting your money aside for future use while investing is putting your money to work for potential earning and better returns over longer terms.
With this, returns are way higher when you invest your money as compared to saving it.
Aside from that, investing can easily help you combat inflation. Inflation refers to the ongoing rise in the cost of living over time. Did you know that according to the financial disruption survey made on the website of TD Ameritrade, almost half (47%) of Americans believe that cost of living is the biggest threat to their financial security?
But when you have investments, you are prepared for the rise of inflation anytime. More importantly, investing is a way to have regular extra income without working hard.
With the financial benefits that you can get from investing, it is easy to get excited and get started right away. But there are still vital things you need to consider to ensure your success, such as your capacity and capabilities as an investor. Here are the vital things you need to consider first.
One of the most important things you need to consider when investing is how much time you are willing to give yourself to achieve your financial goal as well as the risks you are willing to take to get there. Are you looking for short term or long term goals to get a lot of money?
You can’t invest money if you don’t have money. So before investing, know how much you have and how much are you willing to risk. If you are looking for a bigger investment return, then you should invest bigger. On the other hand, don’t expect a bigger earning when you just invest a small amount.
A risk appetite is the level of risk you are prepared to take in order to achieve your financial goals. In order to be successful in investing, you need to consider and assess your risk tolerance. Knowing your risk tolerance, how much or how are you willing to risk to get your goal? Will you take a low-risk investment or a high risk one?
There are a lot of investment types out there like stocks and bonds, currencies, bond funds, index funds, exchange-traded funds, individual stocks, etc. You just need to find the right vehicle and way to invest your money that is applicable to your capacity and capability.
For inspiring investors, here are some of the best investment options that you can do to start investing and growing your money this 2021.
Investment bonds can be found on life insurance policies where you invest a lump sum in a variety of available funds. Other investment bonds run for a fixed term while others have no set investment term. When it comes to earning or cashing in your investment bonds, it will depend on how well or how bad the investment has done. So don’t just invest in home insurance auto insurance.
Invest in stocks is one of the most popular ways to invest. If you are just starting or a beginner in investing in the stock market, the rule is to put your money in an online investment account. You can use this online account in buying and selling shares of stock or stock mutual funds. Also, remember that stock prices tend to change depending on the performance of companies you want to invest in
A mutual fund is one of the many investment products out there where all the funds of investors are pooled together to fund an investment product. Before choosing, you must first consider a lot of factors, like your goals for investment. Is it for long-term capital gains or current income earnings?
Real estate investing is great if you are willing to manage your own properties. Take advantage of the lower mortgage rates today by purchasing and acquiring new properties that you can have leased or sell in the future for a higher price.
Commodity investing refers to investing in raw materials that are either consumed directly like food or used to create other products like gold, silver, etc. When it comes to potential returns, commodity prices fluctuate due to supply and demand, exchange rates, inflation, etc.
High-yield savings accounts are considered one of the safest investments for beginners and are usually tax-free. It has fewer overhead costs, and you can easily earn a much higher interest rate at online banks. However, remember that interest rates are subject to fluctuate as well as the power of compound interest.
The amount that most financial advisors and planners would recommend saving for investments is 10% to 15% of your annual income. Moreover, according to Investopedia, should your income increase by an average of 4% per year, this automatically increases your savings by 4%.
It is easy to get fooled with get-rich-quick schemes. Even wealthy, smart, and financially educated people and investors fall into these traps. Thus, don’t get easily fooled by these types of schemes or advertisements.
When it comes to investing, don’t easily let your guard down. Don’t trust who you think are authorities. Conduct thorough research about the investment or the scheme and avoid making impulsive and irrational decisions.
Bottom line, if you want to make money or earn a little bit extra, investing money is the best option that you can do. Keep in mind, before getting involved in any investment, that you should know your capacity and capabilities first. Don’t make impulsive decisions and always do your research.
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