On the surface, investing seems like a rather simple idea: use your own money to earn more money. However, when it comes down to actually making an investment, things become a little more complicated — especially for those who are just starting to invest. There are many questions that beginning investors ask, and we answer some of them below.
Why should I invest?
This is a common question, especially for beginners who are unsure whether their investment will do them any good or not. Investing makes your money work for you, rather than you having to work it — this means that once you invest, your money can grow (sometimes significantly) over time all by itself! Investing is better than receiving compounding interest from your money being in a savings account, because usually the compound interest rate is incredibly low and do not benefit you significantly in any way — no matter how much money you have in that account.
How do I come up with a Plan?
For good results, you will need a good plan. That is, you want to start figuring out how you want to begin investing. Usually you can consult financial managers at a bank on figuring out a good investment plan; or if you are uncomfortable with committing straight away to an investment, there are many online simulations (such as the Investopedia Stock Simulator) you can practice with to get more comfortable with the idea of investing.
Investment plans vary; for example, many use their 401k (a common retirement fund in the U.S.) to invest, and this strategy will be very different from investing using money you have already saved up.
For those just getting into investing, don’t feel like you have to keep up with the market constantly, as this can become stressful or complicated and put you off from investing. Instead, try setting the investment and only checking back on it every once in awhile.
What do I need to start Investing?
For you to start investing, you will need some capital, or funds you can invest! It is usually recommended for people to save up at least $1000 before starting to invest, as this will also help cover some fees such as trading fees and minimum deposit requirements.
When should I start investing?
As soon as you have what you need to start investing, you can start investing! The earlier one begins their investment, the more that investment will grow. It is recommended to start investing as early as your twenties; this allows more time for your investment to compound.
Here’s an example:
Suppose you begin to invest at 23 years old. You put $1000 into an account with an annual interest rate of 10%. At the end of the year, the $1000 will have grown to be $1,100. You continue to let your money grow, not withdrawing any of the $1,100. Once the next year comes around, you will have $1,210; and so on and so forth. Because you have invested early, the initial investment and profits now have more time to compound.
Featured Image: depositphotos/chepko
