Learning the ropes of the investment world can seem like a bundle of unrelated information, but the truth is that investing is all about the fusion of disparate pieces of information. Getting into investing is something that everyone should do in order to secure excellent financial future, but figuring out where to start can be a challenge. Thankfully, there are a number of trusted sources that can get you started. The rest of the journey, of course, is for you to forge on your own.
Begin in the stock market with wide ranging research.
The stock market is the best place for a new investor to begin. This is because stock trading is reliant on such a varied web of speculation, data points, and trending information. The classroom offered by stock trading applies to every other commodity market you could hope to invest in. It also comes with a much lower risk threshold than many other traded commodities.
In the market, reliance on a mix of secure funds, like a Canadian Couch Potato ETF, and riskier direct buys into promising new companies, can give you both long term growth and the ability to lock in major price swings that will increase value in the short term. Perhaps the most important feature of the stock market is its index funds. Investment banks all around the world curate funds designed to track the market. This is because institutional investors have proven time and again to be ineffectual when it comes to ‘beating’ the market.
Rather than trying to top the market, investors often buy into these index funds that track with it. As a rule of thumb, your portfolio should aim to net about a 7% increase every year. This tracks with a doubling event every seven years—or about six doubles over the course of a modest investment portfolio’s lifetime. Time is your best ally when approaching investment opportunities, so just being in the market, even if you haven’t identified any particularly attractive individual stocks yet, is the best course of action for a new investor.
Essentially, an index fund is an investment in the market itself, or a subsection within it. Indices exist that cobble together banking stocks, technology firms, real estate properties, industrials, and even swaths of the largest market cap companies regardless of industry, among many others. Buying into a piece of the market in order to ride the annualized return of about 9% is a fantastic first step into the investment marketplace. And the modern incarnation of this pattern, according to analysis by Goldman Sachs, is over performing at a 13.6% rate per year for the past decade. Now is the perfect time to begin growing your savings with this energized commodity.
Move into real estate to see increased growth rates.
Real estate is one of the fastest growing industries that double as a savings vessel. The highest net worth investors in our world have relied on the property market for generations to continue building and protecting wealth, and so should you. Once you’ve learned the ins and outs of trading the market with the help of your stock portfolio, a jump into the real estate world is a natural move to higher profit margins.
There are many guides out there that recommend what you should consider before purchasing your first house, but the gist is accounting for both your outgoing expenses and the incoming profits that you stand to make with the investment. Real estate buys typically fall within one of two categories, so understanding the type of investment you are looking at is an important precursor to any real estate purchase. Investors love the lump sum profits that come from flipping homes, but the monthly rental income that is earned by transforming a house into a rental property offers its own unique advantages over the fast paced world of home flipping.
Rental income is a great way to mitigate your mortgage repayment obligation. While you have a tenant living in the home, you can be sure that your mortgage will be covered each month without much hassle. As well, with the constant inflation that brings the value of the dollar down by a few points every year, a home increases in value at an alarming rate over the course of just a few years. As a landlord you may be able to pay down your mortgage with the help of your tenants’ rent payments and then sell the home for a healthy profit down the road.
Investments in alternative commodities provide stability that never fades.
Buying gold, jewels, or antiques at a jewelry clearance sale or auction house is a great way to invest in the value of shiny things that future buyers are sure to love. These types of commodities come along with an appraised value, but the true worth of many of these types of items lie in the eye of the beholder. A speculative commodity like jewelry is worth what someone is willing to pay for it, and a specialty piece is only going to continue rising in value as time passes. With these specialized purchases it’s usually a good idea to wade into waters that you know well. For instance the baseball card marketplace is a vastly lucrative one, but only for those who understand the face value of a rare signed, rookie, or mint condition printing of particular players and the commonality of other players’ cards.
Understand debt as well.
A full picture of the investment landscape would be incomplete without an understanding of debt and the possibility of bankruptcy filing. If you are faced with a declining market and limited cash flow for an extended period of time (such as this economic downturn due to the coronavirus pandemic) then reaching out to a bankruptcy attorney in Louisville, KY is often your best course of action. Legal help is crucial in these types of situations because your lawyer will understand your responsibilities and rights, helping you to navigate the financial realities that lie ahead.
Investments start with knowledge and end with a growing portfolio of assets. Get started on your journey today.