Easy Ways to Start Investing Your Money
Tuesday, December 15, 2020, 6:00 AM | Leave Comment
Putting money into basic savings is an investment in frustration and futility.
Because the inflation rate is nearly always higher than the interest offered by banks, any money in a basic savings account is going to shrink over time.
That doesn’t mean that you shouldn’t have some cash at hand if something goes south; just don’t keep all your eggs in that basket.
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Invest Your Time
If you’re interested in getting into the stock market, start studying articles and podcasts created by people who know ETFs, or Exchange Traded Funds. These funds are structured around indexes.
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What’s a Stock Index?
A stock index is a group of stocks that are grouped around a theme. For example, after the housing market collapse of 2008, stocks around that theme, including raw goods and manufactured goods for the home, struggled a bit. An index centered on the construction industry will rise when interest rates are low and folks have the chance to build homes.
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Study the Jargon
As you learn more about stock indexes and watch what the trends are doing, you’ll notice that there are folks making money when the stocks go up and when they go down. Now is the time to study puts and calls.
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Puts Vs. Calls
A call is when the buyer holds the right or has a contract to buy a stock within a particular time period. You “call” up your broker and buy. A put is when the buyer has the contractual right to sell the stock within a particular period of time. If you’re really interested in learning to time the market, puts and calls will be part of your portfolio practice management.
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Find a Structured Class
If you’re really interested in the niche financial markets and love to watch the numbers move, consider signing up for a Forex trading course. Forex trading is actually using the money of others to make money for you. You’ll be studying extremely liquid markets as the value of dollars move against the value of yen, euros, and other currencies. It’s fast and interesting, but you really can’t learn this one from a podcast.
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Buy and Hold Investors
Most stock investors who have money in a 401(k) or similar retirement account are buy and hold investors. As a general rule, if your portfolio is diversified and you have some money in
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bonds
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low-risk stock funds that have a history of steady growth, and
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funds that are a bit more volatile
you will make money over time. Rather than timing the market, you match your retirement funds to your age. The younger you are, the more money you have in funds that have a bit more bounce, or bigger jumps from high to low. As you get older and have less time to recover from a big drop, you’ll be better off with more money in the more stable funds.
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Start Young
There’s nothing wrong at all with being a buy and hold investor. In fact, if you start young, you can actually build up a nice retirement account, enjoy the 401(k) tax deduction, and collect the employee match.
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Take a Look at What Your Money is Costing You
In addition to putting money into stocks, take a look at what your money costs you right now. If you have credit card debt or a poor credit rating, you could be paying high rates of interest, struggling to get a home loan, or even paying more for car insurance.
If you are looking at getting into any form of stock trading and you’re paying high rates of interest on debt, back away from the market and wipe out that high-interest rate debt first. It’s guaranteed that credit card companies will always collect their interest. Your returns on stock investments are not promised.
Invest with the money that you don’t need to rely on. Your gains aren’t promised, but it’s rare that your principal will be completely wiped out unless the market gets extremely volatile or your portfolio isn’t balanced. Reduce the interest you’re paying before seeking stock gains, and carefully review your risk tolerance. If stock investments are keeping you from sleeping, look for less volatile investments.
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