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Here are some of the best investments for beginners.
- High-Yield Savings Accounts
A high-yield savings account can be one of the best ways to increase the return on your money that’s greater than what you are earning in a standard checking account. A high-yield savings accounts is typically opened via an online bank, and often pay higher interest on average than standard accounts while still giving you regular access to your money.
A high-yield savings account can be an excellent place to park your money when saving for a purchase in the next couple years or simply holding in case of an emergency.
- Certificates of Deposit (CD)
CDs are yet another way to earn extra interest on your savings, but will tie up your money for a longer period compared to a high-yield savings account. You can buy a CD for different time periods such as 6 months, 1 year, or even 5 years, but you typically cannot access the money prior to the maturity of the CD without paying a penalty.
- Workplace Retirement Plan
A retirement plan can be one of the simplest ways to get started in investing and comes with some major incentives that could be of benefit to you both now and in the future. The vast majority of employers offer to match a portion of what you decide to save for retirement out of your monthly pay. If you have an employer that offers a match, but you fail to join the plan, you are essentially turning down free cash.
Workplace retirement plans are great tools for saving since they are automatic after you make your initial selections and let you invest consistently over time. You may even decide that target-date mutual funds are what you should invest in. Target-date mutual funds manage their portfolios on the basis of a specific retirement date. The fund’s allocation shifts away from more riskier assets for the purpose of accounting for a shorter investment horizon the closer you get to the target date.
- Mutual Funds
Mutual funds allow investors to invest in a basket of bonds or stocks (or other assets) that they might not be able to build easily on their own.
Popular mutual funds track typically indexes like the S&P 500, which comprises about 500 of the largest companies in the United States. Index funds typically come with very low fees for the funds’ investors and sometimes no fee at all. The low costs ensure that investors keep more of the funds’ returns and can be an excellent wealth-building tool over time.
- ETFs
Exchange-traded funds (ETFs) hold a basket of securities just like mutual funds, but they trade throughout the day just like a stock would. ETFs don’t have similar minimum investment requirements to mutual funds that are usually at least a few thousand dollars.
You can purchase ETFs for the cost of one share along with any commissions or fees associated with the purchase, but you can even get started with less if your broker allows fractional share investing.
- Individual Stocks
Buying stocks in individual companies is the riskiest investment option here, but it could be the most rewarding. However, before you make any trades, it is first important to consider whether it makes sense for you to buy a stock. The City of London Investment Trust comments on current investment possibilities.
Ask yourself whether you are looking to invest for the long-term, which refers to at least 5 years, and whether you have a decent understanding of the business you are investing in. Stocks are priced each second of a trading day, and due to that fact, people usually get drawn into the mentality of short-term trading when they own individual stocks.
Still, a stock is a partial ownership stake in an actual business and your fortune will rise with that of the underlying company that you invested in over time. If you don’t feel that you have the expertise or patience to ride it out with individual stocks, you should consider taking a more diversified approach offered by ETFs or mutual funds instead.
- Property Investment
Property investment has always been considered one of the safest forms of investment. If you have the funds to do so, investing in property can yield great rewards. Using escrow payment services you can ensure that your funds are protected as you go through the process of purchasing your property.
