investment
Finance

Investment for Beginners: Where and How to Invest Your Money and Avoid Losing Them

How to invest in stocks? How to invest in Bitcoin? How to invest your money and get the best profits?

This article is rather not an action guide but some roadmap. You will know why it is so important to have the skill to invest your money, what to begin with, and what essential rules and principles exist. Additionally, we’ll try to describe assets which are the most suitable for beginners to invest money and get dividends with minimum risks.

Investing is a complicated and partially dangerous activity. But let’s try to make it simpler. This article is not the economical essay like those Warren Buffett wrote, but it still will be useful for beginners.

Why it is Important to Know How to Invest

Inflation, world economic crises, defaults, and stuff happen around regularly. The world of finances is not too durable you could rely only on your savings which lose value, on your job robots and neural networks will do tomorrow, and on states which can get into the storm of the new crisis rapidly. Even despite its risk levels, investing is not only the way to secure your money but the choice to get financial freedom and passive income.

Besides bringing incomes, knowing how to invest your money is a critical skill which teaches to analyze any situation, make the responsible choice, think about all moves you do in advance, and minimize risks.

Is It Worth to Start from Scratch?

People ask Google “how to invest 1000 dollars” nearly 1400 times per month in the US. In fact, even if you start with a hundred bucks, your investments will pay off. Maybe, they won’t bring you money but knowledge and experience. Investment is a skill. And the earlier you start, the faster you learn how to invest money. Small sums are a plus in this case: this is how you lower your risks to miss the boat due to inexperience.

Besides, it is not that difficult to invest money. There is a popular investment principle called “Asset Allocation”: it assumes that the non-professional investor devotes minimum attention to a highly diversified portfolio. Summing all up, you’ll need less than one day per year to control your investments.

How to Invest Money: Basic Rules

Before starting to learn financial instruments and their risk analysis, let’s define investment axioms. Beware, if you neglect to keep up with them, you’ll bankrupt almost certainly. We can’t guarantee keeping will save you from that, but it should assist you in earning money.

Define Your Investment Goals

What do you want to reach with your investment activity? Do you plan to protect yourself from inflation or have a nice pension? In the first case, it will be enough to open a few deposits and devote several hours yearly to service them. If your goal is to earn a lot before getting old, you’ll need to create a severe portfolio with various income sources and then to spend much more time to make it all right. Knowing the goal is the first step towards building the investment strategy.

Create and Expand Your Investment Capital

It’s quite simple: save a part of your monthly incomes. Let’s suppose it’s 10%. Saving more or less is possible, too. Regularity is the point here. The rest 90% will be enough for you to live well, won’t it?

Be Disciplined and Don’t Panic

Just “Google” the gold price dynamics within the last 50 years: despite temporary peaks and recessions, stable growth is the overall tendency. The same behavior is relevant for many other assets even hyped cryptocurrencies. If you made a 10-year plan, don’t sell your portfolio in 2 years because the price of gold got 25% lower. It is quite possible for in to get 100% higher two years later.

How to Invest: Minimize Your Risks

No matter what happens, there always exists a probability to bankrupt, but you still can try losing minimum. The easiest way to do that is to diversify your investment portfolio. Fill it with different kinds of assets (stocks, precious metals, deposits, etc.) with various income and risk indexes. Remember the 80/20 rule: 80 percent of your portfolio should consist of low-risk but low-income assets, while the rest 20% can be high risk and high reward investments.

Have a Financial Cushion

Don’t invest all your savings. In this case, you won’t be able to find money to deal with an emergency if it happens. Not all financial assets have high liquidity. Create a reserve airbag and store it within the closest range.

Don’t Invest Borrowed Money

You can’t be 100% sure about the proficiency of your assets, even if you have reliable insider data sources. It’s too dangerous to play with loans. Better invest less, but make sure it’s yours.

Think Critically

Trust no one and analyze assets yourself before entrusting your money to it. Everyone makes mistakes, even top finance analysts. Believe in your mind and intuition only.

Invest Money into Something You Know

This point comes out from the previous one. If you want to invest money into a functioning business or a startup, choose the project which is close to your competence field. Don’t work with IT-companies in case you are a 100% humanitarian.

Ignore Market Dynamics

Nobody can predict dynamics. No matter what finance specialists say about their substantial analyses, there always are “black swans”: both positive and negative ones. Don’t rush to sell or buy assets every time the market changes the flow. Keep following your original strategy.

How to Invest Money: Best Opportunities

There are many profitable assets nowadays. We won’t go deep but revive only main ones. If the topic interests you, check appropriate websites for more details.

  • They are considered as the most reliable but the least profitable option. A deposit is an excellent way to start learning how to invest money: you won’t get much of income, but protect your money from inflation.
  • Precious metals. Despite temporary recessions, this asset is reliable and shows good profits. The average gold proficiency (inflation included) from 2003 to 2013 was 7.66%, silver – 13.4%, platinum – 12.7%.
  • Real estate. This market is highly profitable (up to 65% during 3-5 years) and allows getting passive incomes. Its disadvantages are the high entry barrier, and higher illiquidity than that of metals, for instance. Additionally, the price of real estate objects severely depends on the overall economic situation in the region.
  • Investment foundations. There are many types of such organizations, but their point remains the same: you entrust your money to professional financiers, and they take a part of your income in return. Investing in a reliable company may bring you 12-40% proficiency with comparable risk levels.
  • Business and startups. The younger the startup is, the more income you can potentially get. Still, 80% of new projects bankrupt, so this option is not for newbie investors. On the other side, income percent has no peak here.
  • This option is very similar to a previous one. Certain company stocks may grow up to tens and hundreds of percents but may fall rapidly as well. Still, one can use low-profitable but more reliable government bonds.
  • They are absolutely new financial instruments, so nobody knows for sure how to invest in cryptocurrency yet. They are unreliable but offering fantastic incomes. In some cases, the price growth reached 100% per month (as it happened to Bitcoin in 2013). Still, its falling was equally loud and rapid.

To Conclude

Investment is probably the only way to protect your money from inflation, though a risky one. But investing should be your minimal plan. Your maximal goal is to get a passive income source. If you do it all right and think critically, any goal is achievable. Be careful and smart, and you won’t have to think about a pension.