Top 5 Investment Strategies for Beginners

 

Best 5 Investment Tips for a Beginner

So you’ve made the decision that it’s time to invest. Perhaps you’ve heard others mention it, or maybe you just decided you want your money to work harder for you. Either way, I totally understand — the world of investing can be a bit overwhelming at first. You have a ton of options available to you but if you don’t know where to start, you could feel even more confused than confident.

But no worries, I can help you with that. When I went off to make my first investments, I felt like I was in way over my head. I mean, concepts like “diversification” and “asset allocation” sounded like textbook terms. But once I figured out how to use it, it opened up a whole new world for me in terms of spending. So if you’re ready to take the plunge but don’t know where to start, here are five easy investments for beginners that can help you maximize your bucks without ending up feeling like you’re betting on the ponies.

1. Invest in Index Funds or ETFs (Exchange-Traded Funds)

Okay, let’s get started with one of the simplest and safest investment strategies: index funds or ETFs. If you’re new to investing, this is a good place to start because they let you buy a small piece of a whole bunch of different companies all in one shot. Instead of attempting to buy individual stocks (which can be risky and stressful), you’re investing in a basket of stocks, which mitigates risk.

When I first got into investing, I did not want to deploy all my funds into one specific stock. What if it tanked? I’d lose everything. So I decided to begin with an index fund that tracks the S&P 500 (that’s a fancy way of saying it includes the 500 biggest businesses in the U.S.). The beauty of index funds is they generally grow over time and they are less risky than having all your eggs in one basket. The same goes for ETFs — they’re just bought and sold as if they are individual stocks.

Here’s the thing: The stock market generally gains over time, even if it takes short-term steps back. By putting money into an index fund or ETF, you’re just riding that wave without having to worry about picking winners or losers. It’s akin to putting your car on cruise control and simply enjoying the ride.

2. DCA (Dollar-Cost Averaging)

Now, here’s a super low-key strategy that’ll spare you the stress of trying to time the market (which, no lie, is basically impossible anyway). It’s known as dollar-cost averaging, or DCA for short.

The concept is a straightforward one: you invest some set amount of money, at regular intervals — $100 a month, for example — regardless of what the market is doing. Regardless of whether the stock market is up or down, you’re still putting money to work at the same rate. This strategy allows you to sidestep the temptation to try to be a market timer, which is really really difficult, even for the pros.

As an example, I started using DCA when I first invested in ETFs. I contribute a fixed amount every month. In some months, the market was doing well and my investments were making good money. Other months, though, the market dropped and I bought more stock at a lower cost. This made me feel much more comfortable in knowing I wasn’t putting all my money in at the top of a price that I eventually forced to pull back as a stock broke above a prior resistance】High Over time, this strategy slashed my average price I paid for investments.

What’s great about DCA is that it removes a lot of the pressure from investing. You don’t have to stress about whether it’s the “right” time to buy. All that you have to do is invest and leave the rest to time.

3. Invest in What You Know

Right, this is one which myself I swear by. It’s not that something “made you buy” a bunch of stuff; when I first started it was my inconsistency that made me want to get into all these fancy investment vehicles, to invest in a bunch of stuff that I really didn’t understand. But then I stepped back and asked, “What do I really know?”

For example, I have used Apple products for years. I love them. I understand how their products work, I understand their customer base, and I understand how they operate.” So, I bought some Apple stock. Guess what? It’s been my best investment of all time. Not because I’m some brilliant stock picker, but because I already knew the company and also the potential.

It’s a bit like purchasing something you, yourself, believe in. Or if you are really interested in tech, maybe investing in companies like Microsoft or Tesla make sense for you. Or if you’re about sustainability, you might investigate firms that pursue renewable energy or green goods. You’ll have a lot more comfort and confidence in your investments if you stick to industries or companies that you understand.

Better yet, if something does go wrong, you’ll be in a better position to know if it’s a mere “temporary blip,” or something more systemic with the company. In other words, don’t be rushed into doing things you don’t understand. So long you avoid trying to do too much, you’ll be well on your way to a solid start.

4. Real Estate Investment Trust (REITs)

Let’s switch gears a bit. Although real estate is one of the best ways to build wealth, I completely understand that it’s not for everyone. Owning property can be expensive, and operating one requires hard work. This is why REITs (Real Estate Investment Trusts) exist.

REITs are essentially companies that own, operate or finance real estate projects. They enable you to invest in real estate without having to purchase any property directly. So if the idea of getting some exposure to the real estate market is appealing to you, but you don’t want the headache of being a landlord, consider getting a REIT.

When I heard about REITs the first time, I thought it was too complicated for a beginner like me. But after doing some research, I found they are a fairly easy way to invest in real estate and earn passive income. You can purchase shares of a REIT in the same way you would stocks, and many REITs offer dividends on a regular basis. So, you earn a little interest on top while your money remains backed by real estate assets.

They can be great to help you diversify your portfolio, and they often provide a regular income. Well worth a look if you want to enter the real estate market without all the drama.

5. Robo-Advisors For A Hands-Off Approach

Lastly, if you’re really not into researching and picking individual stocks, or just do not have the time, robo-advisors could be the route for you. These are online services that use algorithms to design and implement a custom investment portfolio for you, firing on all cylinders with your goals and risk tolerance in mind.

When I heard about robo-advisors for the first time, I imagined they were sort of a cheat code. You essentially say to the robo-advisor how you want your future to look financially (​retirement, buying a house, etc).​ It will put your money into a ​diversified portfolio of investments automatically. You don’t have to do very much, the robo-advisor does it all for you.

I tested the waters with a popular robo-advisor, and to be honest, it was way too easy. The platform did all the heavy lifting, and I just logged into my account every so often. It’s ideal for beginners seeking a hands-off investing strategy. On top of that, most robo-advisors have low fees, so you won’t go broke putting your money in their care.

So, there you have it! Five easy steps to help you take your first steps toward investing. Again, investing doesn’t need to be scary. Shop around, learn as you go and stick with techniques that feel right for you. And if you ever need assurance, just remember you are not alone. Now when you take a step, don’t worry if it’s small, everyone starts somewhere. So what’s your first investment going to be? Tell me — I’d be happy to hear it!

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