New investors often feel overwhelmed by all the different opportunities out there, and don’t know where to start. The last thing you want to do is make an investment that goes south on you and robs you of your hard-earned money, so it’s important to choose wisely when it comes to your first investments in the stock market.
Although there are countless choices, these five best investments for beginners can get you off on the right foot and build your portfolio over time as you learn more about investing.
Investment 1 – Diversify your income
It’s important to understand that investing is different from saving. Investing involves taking a stake in an asset—like a stock, bond, mutual fund, or real estate—with money you can afford to lose.
And by investing, we mean that you should look at it like a game, where over time, you will win some and lose some. There’s no guaranteed return or profit with investing; there are just odds.
Investment 2 – Have an emergency fund
When you’re just starting out, it’s crucial to have an emergency fund. This will allow you to handle any unexpected expenses with ease and prevent large credit card debt.
The recommended amount is to have three months’ worth of expenses in a savings account, though many financial advisors recommend that all earners put six months’ worth of earnings into their rainy day fund.
Investment 3 – Invest in your education
Always work to improve your knowledge and skills. Education is one of our biggest investments, and it’s an investment that pays off. According to research conducted by ANZ Bank, 90% of Australians who invest in their education earn more than $50,000 a year compared with less than 20% of those who don’t make such investments. For anyone looking to get ahead, make sure you are investing in your education from an early age.
Investment 4 – Calculate how much you need
Before you invest in any of these options, calculate how much money you have to invest and how much return you’re looking for. You can do that by running a budget or starting with your earnings or debt totals.
Once you know how much money is available, it will be easier to figure out how much to allocate toward investments. If you don’t have enough saved up to meet your desired investment levels, try saving more before investing any more money into options that carry higher risk.
Investment 5 – Buy a home
A homeowner is a person who owns one or more residential properties and/or dwelling(s) in which they (and/or their family) live. Being a homeowner comes with many benefits, including building equity and gaining property tax advantages.
If you are thinking about getting into real estate investing, your first move should be to purchase a home that you can live in while rehabbing properties to sell. After all, you can’t build equity until you own something!