Investing Basics You Should Know

Investing Basics You Should Know

If you want to really make money, the one way to do it short of becoming a highly paid celebrity or a top CEO, is through investing. This approach allows even those with modest incomes to build wealth over a lifetime. However, if investing is something entirely new to you, understanding it can feel overwhelming. Below are a few things to keep in mind and some suggestions on how to get started.

Protecting Your Retirement

Many people first become familiar with the concept of investing through an employee sponsored retirement account. Unfortunately, they often do not fully grasp the importance of protecting this money. A retirement fund can substantially increase in value over the years, and the younger you are when you start it, the more dramatic that growth can be. However, many often plunder their retirement savings for any number of reasons. 

It may seem like a good idea to take money out to help your kids pay for college, but there are better options for financial aid that don’t involve sacrificing your future security. Keep in mind as well that most types of employer-sponsored retirement funds are protected in case of bankruptcy. It’s best to think of these funds by not really thinking about them at all, in a way. Pretend that it’s money you don’t have access to so that it can grow.

Consider Real Estate

Another common form of investment is real estate. This is the case even if, as with a retirement account, they don’t necessarily think of it as investing but simply as buying a home to live in. However, along with the retirement account, real estate can be one of your most stable and valuable assets. You can also use real estate to build wealth, purchasing one or more homes to rent out or even starting by renting out a room in your home. 

It’s important to understand the annual percentage rate if you are taking out a real estate mortgage loan. It may affect the total cost of your loan as well as how much you’re paying monthly. You can review a guide to get a better understanding of APR, how it differs from the APY, what the different types of APRs are and how it will affect you.

Opening a Brokerage Account

This is more in the realm of what many people traditionally think of as investing. You don’t have to be rich to buy stocks, mutual funds, or other assets, and you don’t even need to know a broker. You can open a brokerage account online and start with just a few hundred dollars. 

Online brokers also have tools that can help you determine where to put your money. If you want to familiarize yourself more with investing and take some action on your own, you can, but if you also just want to park your money somewhere it is likely to grow, you can do that as well. Another option is working with a stock market simulator, also known as paper trading, which can help you learn more about the markets without spending any money.