An Investment Guide for Beginners
The economy is said to be recovering, but the reality is that the markets remain volatile. While it is certainly true that investing money is important, as it means money will grow for your retirement, it is also a complicated world that you will need to understand in order to be successful. Hopefully, the following information will be of some benefit.
A Two Step Process
There are basically two steps to becoming a successful investor:
- Learn about the types of investments that are out there and that you may already have.
- Learn how to make an investment strategy.
By completing those two steps, you will already be ahead of the game.
Four Types of Investments
There are four types of investments and you need to get to grips with all of those to find out which one is right for you. Your choices are:
- Safe investments. This is like a bank account where you get some interest on any money you put in. Unfortunately, these interest rates are so low that they are almost worthless. While low interest rates are good for any money you have borrowed, they are pointless when it comes to saving.
- Bond funds. Here, you should be able to earn interest of at least 3%, which is marginally better than the safe investment. However, when the interest rate rises, the value of bonds drops. This is known as ‘interest rate risk’. This means that if you have reason to believe that interest rates will rise, and they will in the not too distant future, there is little point in getting bonds.
- Stocks. With stocks, you should be able to see returns of around 10% per year, if you do it right. However, if something goes wrong on the stock market, as it did during the recent economic collapse, you will lose your money. Indeed, some people didn’t experience 10% gains, they experienced 10% losses. Confidence, therefore, is still at an all-time low.
- Alternative investments. These have always been popular during times of high uncertainty and low confidence, like now. One very popular alternative investment is real estate. However, real estate remains risky, as we have seen with the collapse of the housing market. There is an opportunity to strike it big, but also one to lose big. Alternatively, there is gold and silver and other precious metals, which have always done well. While the price of precious metals fluctuates, this is generally the best opportunity to invest. However, the price is very high at the minute, which means you need quite a bit of money to invest.
All of this paints a pretty bleak picture, but it’s not. By working together with a good investment expert like Steve Liefschultz from Equity Bank, you will be able to get sound advice on what the best forms of investment for your personal situation and finances are. Getting advice and guidance from an expert is always the best idea.