Investing Unraveled: The 3 Best Ways to Start Now and Why
The advent of investing is widely regarded as an art nowadays, and rightly so. There’s something so simple yet incredibly admirable about the fact that a single prudent decision can let you make money as you sleep, eat and drink: all year round.
Once you’ve taken those first steps towards earning, saving from impulsive purchases and implementing an investing mindset, you’re on the most effective path towards indulging in the growth of your wealth. All you have to do is put that money to work in the right places, and here are 3 of the best ways to do so:
1. Equities (Stocks)
This is likely the most predictable yet popular choice when it comes to first getting into investing, and rightly so! Investing into the stock market – especially while you’re still young – is undoubtedly one of the most beneficial steps to take if you’re considering building your wealth. Why’s that?
a) The Upside:
If you’ve done some sterling due diligence and are able to pick the right stock, the upside is exponential. Businesses listed on the share market possess a notorious ability to grow their investor base at a rapid pace and therefore cause profound augmentations in their stock prices every year, so investing in them beforehand gives you the potential to double or even triple your money within a short span of time.
To give you a few examples, Twilio (NYSE: TWLO) and Okta (NASDAQ: OKTA) are companies that gained 278% and 149% respectively in 2018 alone.
If you had $500 invested in both of these at the beginning of 2018, your total investment would be worth over $2800 by the end of 2018.
You would’ve almost TRIPLED your money in a year by leveraging the stock market’s potential to your advantage, so you should genuinely consider the benefits of this medium of investing.
b) If you’re young, RISK!
From the age of 16, 17, 18… all the way up to 23, you can afford the thrill of the risk: you have no dependents. You’re not putting anyone through school, medical care or sustaining the burden of rent, so you can take your risk-reward ratio up a notch…or several notches.
If you desire those juicy profits that we continuously seek at The Dividend Payout, don’t be afraid to get your hands a little dirty in the financial markets. Remember that it isn’t the end of the world if a stock pick doesn’t work out well: if multi-billionaire Warren Buffet can get it wrong on occasion, then so can you. Misjudging the potential of a stock's performance is a common mistake, but you'd unlikely be significantly affected even if you lose a big portion of your money: you’re still young and would’ve only invested several hundred bucks.
Moreover, starting your investing journey now allows you to get a head start on experiencing all the possible mistakes that you could make; isn’t it better to learn from those mistakes now, with only $500 invested, rather than later, when you could potentially have $50,000 invested?
c) Contrary to convention, you DON’T need a lot of money:
Although another article is going to go into more depth about this point, the bottom line is that your starting capital needn’t be as large as you think. A great number of potential investors stray aside from the stock market because they believe that they need tens of thousands of dollars to get started: WRONG.
You can use Contract For Difference (CFD) stocks to invest with as little as $100 to $500, so fear not! I’ll explain what CFD’s are in a lot more detail – along with methods to avoid their risks – but they essentially work exactly like buying stocks except for the fact that people without tens of thousands of dollars can still invest. For example, I could invest $500 to purchase 0.28 shares of Amazon Inc. (current price of $1792.57) through CFD’s, and still experience the same benefits in terms of profitability margins, instead of needing almost $1800 to conventionally buy 1 share of Amazon.
As you can see, it’s a lot more convenient for people without thousands of dollars to use CFD’s for beginner’s investing. From the upside, to the risk-reward ratio, to the low funds required as well the learning experience as a whole, the opportunity is indefinite!
2. Peer-to-Peer Lending
Although P2P Lending is becoming more pervasively known and implemented as the years go by, there are still a large number of young investors who are unaware of this medium of profit-making.
Peer to Peer Lending is the process of lending money to small businesses and individuals in exchange for an interest-included repayment after a specified time period. It’s almost exactly like a bank loan, except it can be done with smaller amounts and consists of the possibility to automate the entire process. It’s an incredibly convenient way to secure a passive income stream, and has therefore become one of the go-to prospects for a growing number of young, business-minded individuals to start investing in.
If you’re looking to start investing more conservatively, this might be a good place to start because a lot of the risk is mitigated, especially if you use an automated P2P Lending Platform. For example, Bondora can almost unconditionally guarantee you a 6.75% return each year with their Go & Grow Portfolio. This is a relatively low-risk portfolio and is targeted for investors that are new to the P2P platform and aim to secure a stable return. Here are the potential returns from it:
As you can see, you’d be making almost 50% in profit over the course of 10 years in pure PASSIVE income. If you’re a little more money-driven and don’t want to wait that long for 50% profits, Bondora has you covered with a higher risk-reward portfolio that you can check out here.
If you’re not willing to pursue the research that comes with successfully profiting from stocks, a high risk-reward automated portfolio could be your best bet!
Pro Tip: Remember that, while you won’t have to do any equity research, the performance of this asset is almost completely out of your control: so you’re most likely going to drown in an abyss of blaming the portfolio if you end up losing money. Contrastingly, with stocks, you have full autonomy over what you invest in, so if you’re a person that feels they still want responsibility and control over their money, I’d recommend staying with investing in equities instead of the aforementioned portfolio.
On the flip side, if you’re content with an automated machine operating your trades (which still does do well most of the time) and you are indifferent to who is in control, then this form of investing is suitable for you. To open an P2P Lending account and start your passive income stream, follow this link:
3. Index Funds
Tony Robbins – who’s an incredible inspiration in my opinion – preaches the advantageous nature of Index Funds (diversified funds that comprise of tens or hundreds of companies combined) in his latest book called “Unshakeable”. He argues that they are the go-to asset for investors in any age bracket, and here’s why:
a) Index Funds tend to be EXTREMELY low cost:
In a financial market where most investment platforms are charging unscrupulous fees, Robbins suggests that you should invest in low-cost Index Funds (such as the Vanguard Growth ETF) because you’ll be sacrificing far less extra income over time; only 0.18% compared to the conventional 2%-3% that most mutual funds charge.
Personally, misrepresenting the significance of fees in my investing journey caused me to forego over $200 in costs when it should’ve hardly been in the tens. This crucial mistake is why I can assuredly tell you that high costs are extremely important to look out for: don’t let your investment growth be affected by the concealed impalpability of growing fees.
Nevertheless, the conclusive outcome here is that there is a plethora of low cost index funds available to choose from, most of which will consistently pay you 7%-10% per year. For people who enjoy less risk but still want to indulge in passive income, low cost index funds are one of the best ways to start!
b) They use diversification advantageously:
Since Index Funds are an amalgamation of different companies, this is an opportunity to reduce your risk even further. Having a myriad of companies from different industries means that the fund correctly exploits diversification: ultimately making the fund a much safer investment. For example, if the healthcare industry falls, the portfolio will not fall anywhere near as much because it’ll only be comprised of a few of health stocks.
Consider the particular fund below:
As you can see, this Fund holds a pervasive range of industry stocks, so your financial position is in a much safer, risk-mitigated holding platform. If you’re an individual who doesn’t aim to endure high risk and are perhaps looking to slowly and relatively safely grow your money, then this is the optimum low-risk asset class which can pay you anywhere from 7%-18% per year in passive income.
Conclusively, this article provides an array of different asset classes that can be beneficial depending upon your particular financial aim.
If you’re a young and money-driven individual, then investing in equities is perhaps the most beneficial platform to use. Although they carry higher risk, the potential rewards are exceptional. Moreover, if you’re investing in stocks anywhere between the ages of 18-23, you stand a far better chance of being successful in the financial markets in the future because you’d be consistently learning from your mistakes now, when the stakes are low, instead of later when the stakes are much higher.
Hence, the value of the potential reward as well as the priceless learning experience that comes from investing in stocks arguably outweighs the conventional risk placed on them.
Nevertheless, whichever investment class you choose, the most significant aspect of this article is that you should START NOW. This is critical: The biggest mistake you can make in the financial markets is not being in the financial markets.
Start investing in the growth of your wealth TODAY, and reap the immeasurable dividends gained from it down the road.