The biggest misconception about investing is that it’s only for the rich or people have a lot of knowledge on the investing topic.
That might’ve been true to some extent many years ago. But that barrier to entry is gone today, with the presence of the online companies, applications and services that have made it their mission to make investment options available for everyone, including beginners and those who have just small amounts of money to put to work.
In fact, with so many investments now available to beginners, there’s no excuse to skip out this out especially if you are willing to become financially independent, here is the good news, because investing is the best way to grow your wealth.
I have added below some easy ideas to start investing as a beginner.
- Index funds
Index funds are like automated type of the mutual fund: instead of employing a professional manager to build and maintain the fund’s portfolio of investments, index funds track a market index average.
A market index is a selection of investments that represent a portion of the market. For example, the S&P 500 is a market index that holds the stocks of roughly 500 of the largest companies in the United States. An S&P 500 index fund would aim to mirror the performance of the S&P 500, buying the stocks in that index.
In most cases the Index funds can have minimum investment requirements, but some Brokerage Companies, including Fidelity and Charles Schwab, offer a selection of index funds with no minimum. That means you can begin investing in an index fund for as less as $100 only!
- Retirement Plan or 401 K
If you have a 401(k) or any another retirement plan with your employer, it’s very likely the first place you should invest your money in, especially if your company matches a portion of your contributions. That match is free money and a guaranteed return on your investment.
Even if you starts with as little as 1% of each paycheck, though it’s a good idea to aim for contributing at least as much as your employer match.
When you start to contribute to a 401 k, the money will go directly from your paycheck into the account without ever seeing it at your bank.
To sign up for your retirement plan or 401(k) it’s always that easy of only contacting your employer HR department.
- Exchange Traded Funds
Exchange Traded Funds “ETFs” operate in many of the same ways as index funds: They track a market index and take a passive approach to investing. They also tend to have lower fees than mutual funds. Just like an index fund, you can buy an ETF that tracks a market index like the S&P 500.
The main difference between ETFs and index funds is that rather than carrying a minimum investment, ETFs are traded throughout the day and investors buy them for a share price, which like a stock price, can fluctuate. That share price is essentially the ETF’s investment minimum, and depending on the fund, it can range from under $100 to $1000.
As ETFs are traded like a stocks, brokers used to charge a commission to buy or sell them. The good news: Some brokers, including the eToro have dropped trading costs to $0 for ETFs. If you plan to regularly invest in an ETF — as many investors do, by making automatic investments each month.
With the new technology helping us in every aspect in our life, same happen in the investing world. These services manage your investments for you using computer based algorithms. Due to low overhead, they charge low fees relative to human investment managers. Robo-advisors typically costs 0.25% to 0.50% of your account balance per year, and many allow you to open an account with no minimum.
They’re a great way for beginners to get started investing because they often require very little money and they do most of the work for you. Still you will need to keep close eyes to your account, it’s your hard earned money, but having these computer based program to help you will be a good head start to your investing world.
- Investment Apps
There are several investing applications target new investors. Some of them are spam free & really are offering good services and help to us as unprofessional investors.
One of the smart applications is Acorns, which rounds up your purchases after getting linked to your debit or credit cards and invests the change in a diversified portfolio of ETFs. On that end, it works like a Robo-advisor, managing that portfolio for you. There is no minimum to open an Acorns account, and the service will start investing for you once you’ve accumulated at least $5 in round-ups. This is besides having the option to load your portfolio manually beside the round-ups as you have any extra cash which is not needed.
There are three different options available with Acorns app;
- Invest: This option costs $1 per month and gives you the option to put their spare change to good use. Plus, you can earn bonus investments from the app’s partners.
- Invest + Later: Priced at $2 per month, this option earns tax advantages and helps investors save for retirement. The account is updated regularly in order to match your preset goals.
- Invest + Later + Spend: This is the most expensive option at $3 each month and comes with its own Visa debit card. There are no account fees. Plus, you can continue to invest through both retirement and built-in investment accounts, and you can earn up to 10% in bonus investments.
Simply there is multiple of ways to start your investing journey today, the main thing is that you need to start. All of your early investment decisions will add up as the time goes by and with the help of the compound interest magic.