Investing 101
By Ty Isaksen
Adapted by Nicolette Lamanna
What is investing?
Basically, there are two major ways to gain money:
Earning a wage
Investing your earned wages to get returns on your investments. Investing constitutes the second of the two options. Put simply, investing is making your money work for you.
Wait, you can do that?
Well, of course. This might be a bit shocking to learn, but there really are other places of putting your money than your savings account. In fact, many methods are much more effective than just keeping one’s money in a savings account as well.
There are multiple different methods of investing, each with their own levels of risk & reward. Some people choose to do it all alone, and some prefer to pay others to handle their assets for them.
Well, sign me up!
Slow down there. First, you’ll have to understand some of the types of investing, otherwise, you’ll be at risk for losing those precious dollars of yours.
What are some types of investing?
First, it’s important to understand what some of the differences are. Different methods of investing have different qualities that make them suitable for different investors. These are some of the differences:
Level of Risk/Aggressiveness
Type of asset that you are investing in
Level of control you want over your investing
How much money you need to begin investing
Real Estate
Real Estate investing means buying property in hopes that the value of the property will rise.
Source: Money Under 30
Stock Market
Investing in the stock market is when you buy a share of a company, and hope that your share rises in value.
Robo-Advisors
Robo-Advisors are non-human software that you give your money to and can invest it based on your preferences.
ETF & Mutual Funds
ETFs and Mutual funds are diverse funds you can invest in and are relatively low-risk.
What should you invest in? Ask yourself…
Do you like handling your own investments?
If yes, then you should consider something that gives you a greater sense of autonomy. Try dabbling in the stock market or looking into real estate investing. Most forms of investing can be done without much outside help, so do some research, and get to work!
Or would you rather have some help? (Or have someone do it for you?)
If this is the case, then look into a form of investing with more guidance, such as a robo-advisor. A robo-advisor will do all of the heavy lifting for you, so you can sit back and watch the cash stack. However, be aware, this often comes with a price in the form of “management fees.”
Are you a risk taker?
If you are, then you should consider investing in assets with a higher risk, but a higher reward as well. These can be single stocks, real estate, or hedge funds. Be careful, however, as this can quickly lead to you losing the money invested.
Or do you like to play it safe?
That’s great, and that’s what is recommended for those who are just beginning on their investing journey. In this case, put your money into an ETF or Mutual fund, as these are much more diverse, and are much less likely to end in a net loss (meaning you’ll keep more of your money!). However, if you are expecting huge payoffs from playing it safe, you will likely be disappointed.
Steps to investing: how to get started
1. Save Money
This is when a savings account really does come in handy. To invest money, you must have money.
2. Think about what you want
Ask yourself: How involved do you want to be with your investments? How much risk are you willing to take? How much money do you want to invest?
3. Set some goals
Set long-term investing goals (retirement, 10 years in the future, etc.) and short-term goals as well.
4. Choose which method of investing you like
Choose whether you want to give your money to a robo-advisor or try your hand in the stock market.
And finally…start investing!
Congrats, you’ve made it this far! Time to start investing!
Open an account and start putting your money to work. You’ll be glad you did!