Stocks are one of the most vital financial instruments in the world today. Here's a guide to provide a basic understanding of one ...
When it comes to investing no amount is too small. Check our guide and tips for investing with a small budget and don’t let your money sit idly.
Many tend to associate investing to people in suits and corporate offices, especially Wall Street, as seen in many movies. The truth of the matter is, you don’t have to be a corporate officer or belong to an investment group to invest your money and gain a decent ROI.
Investments date back to the 1700BC where people would give agents a sum to do business with an agreed profit percentage. The agent was however not held liable for loss incurred in doing the business. Nevertheless, in 1934, Benjamin Graham wrote Security Analysis, and he is now renowned as the father of value investing.
Before starting investments, potential investors need to be informed of their options in the market, some of which are highlighted below:
This is the market for beginners, as the stock market is full of many opportunities. It is advisable to invest in any one of the Big 7 tech-based establishments in the world, known as FANGMAN stocks. These stocks are some of the best performing securities on the market today. Once acclimated with the market and securities from publicly traded firms, some less publicized stocks offer good ROI without as high a risk as one would expect.
These are the safest investments to make. Possessing low risks, they also offer low returns on investments to traders. Bonds are not subject to the effects of economical and socio-political factors, unlike stocks. Some bonds offer better interest rates compared to others, depending on the maturity time and price of the bond. Nevertheless, if the investor is not a risk-taker, bonds are the way to go.
Not all people have the time to trade, which is why funds are the way to make money while occupying oneself in other activities. Indexes refer to a group of the biggest stocks in a particular segment, and cannot be traded as a single unit.
The aforementioned bonds can only be traded by purchasing funds, given that bonds do not have a defined market, and as such, not easily accessible to the general public. Other than the interest rates and risk to consider while investing in funds and indexes, there are also the commission fees that will be deducted from the interest; commission that can go as high as 8%.
Although relatively new, cryptocurrency has taken the globe by storm. Using Bitcoin as an example, whose value has multiplied to over 500 times its initial value over a mere 10 years. Those who invested in Bitcoin back then are grateful they took the leap of faith. Although it is highly lucrative, the risk posed is extremely high while compared with other forms of investment. Over the last 10 years, several forms of cryptocurrency have started and failed, leaving many investors distraught; meaning this is not for the fainthearted.
Forex trading is very much like crypto, dealing majorly in all currency from around the world. It leads other forms of investments as the biggest market on the globe, with massive traffic. This is unsurprising because the market is always in operation all the time, every day a week. The market is valued somewhere around $7 trillion, with up to $2 trillion in currency trading at the spot exchange rate.
This encompasses arts, properties, antiquities, gold, jewelry, and vintage materials. These materials generally catch the fancy of the wealthy and classy. The market for art increased in value by $3 billion in a year, meaning that they are a good choice for investors looking to secure ROI with little risks. Although these materials constantly increase in value, they are not easily liquefied, making them a good choice for long term investors.
In the world of investments, there is a wide range of options to pick from. From the typical stocks and bonds to cryptocurrencies and bonds, down to even arts and antiquities; the options are limitless. However, each investment option is accompanied by its own risks.
There are several bonds which almost never disappoint, but have a low yield in comparison to the high-risk investments like Forex and cryptocurrency. Before delving into forms of investments that can be made with regard to the amount one has, we must first discuss the process involved in starting a life of investing.
The first step to starting a life of investing is to save a percentage of monthly or yearly income to invest by cutting down a couple of unnecessary expenses that one incurs. Since saving money might be somewhat of a difficult task for some people, it is advisable to employ the use of applications to deduct a specified amount from a registered bank account into the person’s account on the application. These mobile apps help people save their money whilst providing a tiny interest rate on the money till the stipulated cash out date.
Prior to beginning the saving process, it is advisable to look at debts incurred, how much the potential investor is earning and how soon those debts can be paid if a particular portion is deducted for savings per month. If the debts cannot be paid to a reasonable extent (factoring in interest rates) before the amount to be saved is completed, then it is not feasible to engage in it. Gathering money for investment while living in crushing debts is ill-advised because all investments are a risk, and it could all fall apart, resulting in loss of invested money.
If a potential investor falls into the category of those in the previously highlighted point, the person could take advantage of tax refunds from the government to pursue investment opportunities, to generate more income to pay off incurred debts while carefully selecting what form of investment to pursue, taking into account the risk and ROI involved.
Although investments are a great way to make money, one must also consider the future. Given that most employers and the government offer good retirement options. Using a part of the gained salary to secure the future after work rather than investment might not be a bad way to go; unless one can afford to take the risk of the investment failing. In a case of choosing to invest, the individual must take into account the kind of investment to make, while avoiding fixed priced options. The investments should also pose less risk as the investor approaches the end of working life.
$500 might not seem like a lot to go on, but when starting a life of an investment, no amount is too small. Depending on the type of person you are, there are a couple of options available to try out. If the investor is not one to associate with major risks, it is advisable to invest the money in short-term bonds. These bonds can only be purchased over-the-counter from brokers. Bonds are generally low risk, although some possess greater risks than others depending on the price and interest rate.
Nonetheless, bonds almost never yield losses for investors. If the investor is one to take a couple of risks, there are a variety of options available. The investor should consider putting money into tech-based stocks, which are the best-performing stocks in the market right now; or can invest in startups that offer even high ROI, but always run the risk of failing.
If one is looking to invest long-term, this is the way to go. Putting money into low-price investments which allow for the option to set a date to gain Returns on Investment. All gains realized within the course of investment are automatically reinvested. Investments in this category are usually made to index funds, which are approved by worldwide renowned investment genius Warren Buffett.
An investor can also put money into single stocks, stocks which have greater risks but provide better interest rates. Eventually, it all boils down to what form of investment the person is looking to make and how soon he/she wants ROI.
There is an even wider range of options available to anyone with money in this category. Among these options is the possibility of investing in real estate. While this amount is clearly not enough to purchase any form of building, investing in trusts that are mandated to disburse over 85% of the income generated as dividends to all investors. In the real estate market, there are still options available, from crowdfunding to equity, and debt investments; bearing in mind that each of these options poses a greater risk with higher interest rates.
The more money one has, the more one can invest, make more money, and reinvest to make even more money. Although starting out with a small budget, Warren Buffet built one of the biggest empires in the world through his brilliant investment strategies, and that could be you. Don’t let your money sit idly, use your money to make more money for you.