Students are often inspired by millionaires and billionaires their age. However, only a few manage to become truly outstanding. But creating a source of passive income and saving money over a couple of years is a viable option to open your own business. No doubt, investment is one of the paths to financial independence.
How to start investing? What to invest in? What are the pitfalls? You will find the answers to all these questions in our guide for beginners.
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Key Points To Keep In Mind
Discipline. Invest a certain part of your income into purchasing assets every month. This can be either a specific amount or a share of the income received ranging from 10% to 30%. The investment portfolio is your emergency reserve.
Increase your investment literacy. It will allow you to increase your return on investment over the years and learn to find opportunities that you don’t notice.
Stick to a strategy that is based on acceptable risks and desired level of income. Consider asset categories and economic sectors. Invest in what you are well-versed in.
Diversification. This point can be found in any investment guide. A balanced portfolio consisting of reliable assets, as well as promising but riskier securities, will provide both increased income and safety of invested funds.
Don’t invest with borrowed funds. No matter how attractive it looks.
What To Invest In?
Novice investors are advised to invest in financial instruments that can be managed from anywhere in the world and converted into cash. Here are 5 types of assets available to everyone:
- Stock. A popular category of securities. By purchasing shares, you buy part of the company and a share in the profits, which is paid as dividends;
- Bonds. Debt securities of a company or government authority. Their profitability is usually lower than that of stocks, but they are pretty reliable;
- Unit investment trust. You acquire a share in it. As a rule, funds specialize in various sectors of the economy and types of securities. For example, a fund focused on Asian stocks showed profitability, while the securities of most American issuers went down;
- Gold and silver. Investments in this type of asset should be made for the long term (from 10 to 15 years). In addition, experts recommend investing no more than 5–10% of your funds in gold and silver;
- Currency. Transactions with foreign money, using cross rates and selling them in a timely manner can bring excellent income. With a professional broker on your side, you can buy currency at exchange prices.
The advantage of this method is the low entry threshold.
Alternative Options For The Future
Real estate
This investment option requires significant one-time costs. These may include a down payment on a mortgage or the full payment for the property. This option is available if the above-mentioned investments have brought results and you can freely use them.
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Business
When we talk about this type of asset, we mean participation in existing projects, not opening a startup from scratch. Basically, significant sums may be required for co-financing of the company. At the same time, the risk of losing everything will be great if a novice investor is poorly versed in the industry or made a mistake choosing the wrong partner.
Step-By-Step Guide
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Estimate How Much Money You Are Ready to Invest
Theoretically, you can start with any amount. The main thing is that it compensates for the commission that you will have to pay and the time spent on trading. It is better to imagine a situation in which you will lose all this money. If it’s not a disaster for your budget, you can try it.
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Think About How Much Time You Are Willing To Spend
If you are ready to immerse yourself in the topic, and constantly monitor the situation on the stock market, you can try trading on your own. Then, you will need a broker who will become your intermediary to access the exchange. You will make decisions about buying and selling on your own and the broker will carry out your instructions.
If you don’t intend to spend a lot of time and effort on investing, then consider trust management. The professionals will handle the investment of your funds.
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Decide On Strategy & Assets
A strategy will determine your behavior on the stock exchange: what instruments you choose, what returns you expect and what losses you are prepared for, for how long you plan to invest, etc.
In the simplest version of the strategy, you choose:
- Assets;
- Investment period;
- Maximum amount of damages.
To Wrap It Up
What we have today is determined by our actions in the past. If you study the biographies of rich people, you will see that their fortune wasn’t the result of one effective action. It was built up over the years from buying and selling assets that increased their capital.
Money must work and generate income. That is why, when you have free capital, you think about where to invest money and how to make a profitable investment. Today, there are different investment options – some of them simply require capital, while others will also require plenty of your time and attention.
After familiarizing yourself with the options where you can invest your money and how to do it right, you will be able to choose what works best for you.
