Thursday, 23 January 2020

How To Invest In 2020 - A Beginner Guide

How To Invest

Let's talk about one of the most common questions that I seem to get which is how do I start investing? What do I invest in and what are some things that I should be aware of when investing? In this article, we're going to break down some different types of investments that might be available to you.

This article is going to be primarily focused on my personal investing strategy. I want to share my opinion and I want you to keep in mind that I'm not a financial advisor I'm just a guy who is sharing his ideas with the internet, so take everything as a grain of salt, make sure that you are doing your own research on some of these things and you and only you are responsible for the financial decisions that you make.

But if you read this article in full I can promise you that you're going to have a better understanding of the different types of investments that might be available to you as well as maybe a clear vision on which route you would like to pursue to achieve financial freedom. Keep in mind that every type of investment involves some type of risk maybe it's a very small risk or maybe it's a very large risk that really depends on the type of investment and potential returns that might be associated with that.

Let's Get Started


1. High-Interest Saving Account

Whenever I don't know where to put my money I started by putting it into a high-interest saving account and once again, I'm not telling you to do this, this is what I personally do, so I put my money into which is barely even investing but it's a start for myself where I think a lot of people what they'll do is they'll just have money either cash literally like under their mattress or they'll have money in a bank account that's getting them 0% interest or a 0.05% interest like Bank of American or Wells Fargo.


High Interest account

The problem with this is that there's something called inflation and every year inflation is roughly about said 2% and if you're not keeping up with inflation your money is literally losing value every single year that is sitting in a bank account. So just putting money in the bank account or burying your money in your backyard somewhere it's not going to really help you build wealth because over time it's devaluing, so you're losing value in your money.

Something as simple as high-interest savings account generally keeps up with inflation, right now I see a lot of high-interest savings accounts at about 1.85% up to about 2%

High interest account

It kind of goes with the federal interest rate, so if interest rates go up then the interest rate for a lot of these high-interest savings accounts might go up to 2.5% or closer to 3% and once again, they can do down as well. A lot of different high-interest rate savings accounts are available so you can use something like Citibank, Barclays, wealth front, American express, so many different companies have these high-interest savings account. 


  • Let's talk about 3 other investments and things that you may want to explore for yourself and one thing that I will say is that regardless of what type of investment that you choose for yourself. it's important to really understand how it's functioning, it scares me how many people are investing their life saving into things maybe it's real estate, maybe it's stocks, bonds, mutual funds, whatever it is they invest their life saving into something and they don't take the time to understand what they're actually investing into.

2. Stock Market

I Will kind of bundle this in with mutual funds, ETFs, index funds, I think a lot of people get confused about this because it just looks scary if you've never really learned about it in school because most schools don't teach it, it might look a little bit scary you hear people talking about their brokerage firm, you hear people talking about their IRAs, Roth IRAs, 401ks, or retirement accounts, custodial account. What we're going to do here is simplify as much as possible if you want to start investing in stocks, bonds, mutual funds, or different types of things in the stock market


Read: What Are Mutual Funds, Index Funds, And ETF?

Brokerage Account

The first step here is to open up something called a brokerage account and this is similar to opening up a bank account, it's the same process, and you can do it in 5 minutes online right now. The one thing I will say is that if you're not in the United States, the brokerage firm that you can open up an account with to start investing they're going to be different in every country or every region in the world. If you live in Argentian you're probably going to use a different brokerage firm to buy and sell stocks than you would if you're in the US and the same if you're in China.

In most cases, you can start with $5 to $10 to start investing.


Active Vs. Passive

There are two different routes you can go when it comes to investing in the stock market there's active investing and there's passive investing


Active Investing

This could be something that what I did when I first started which was buying individual stocks, for example, you buy a share of coca-cola stock what this means is let's say it's $54, let's say that you buy one share


coca-cola

This means that you now own $54 worth of coca-cola the company, not just like the actual soda, you actually own a piece of that company when you invest in it. People like to invest in individual stocks for various reasons, obviously, the goal is to find a stock that you think the stock price should be at $80, right now, it's at $50, therefore, you think it's going to increase over time and so you invest your money into it.

What I would suggest doing here is pick up a couple of investing books, start learning about it.


Start Small

The thing that I really like to do is start small. I think when people start with $10,000 maybe they got some money that they inherited from their great-uncle give them $40,000 as an inheritance because they just passed away, but with this money, people just go and they just dump all this money into one stock or one investment and they lose their shirt. But what I would suggest doing is start small with investing, start with $5 to $10, over time as you learn more as you read more books and as you make more mistakes you're going to learn from that mistake. Over time you learn from that mistake that you make and you probably not going to make them again because they were a mistake.  


Passive Investing

This is something that I actually really like to do these days and it's something that millions of Americans and other people throughout the world like to do as well. One of the benefits of passive investing is that you don't have to spend as much time thinking about what you should put your money into. If you're investing in individual stocks like coca-coal, Apple, Google and Facebook stocks you're probably going to be spending a lot of time reading these financial statement listening to the company earning, thinking about what the company's next move is

But if you're investing in a passive investment something like mutual funds or ETFs (exchange-traded fund) or index funds. The idea here is that if you can invest your money into mutual funds, ETFs, index funds, that contains 500 or 1,000 different stocks, 1,000 different companies, well, if one company in that 1,000 fails, the other 999 will bring it up, that's essentially the idea here that you kind of smoothing out your investments by investing into a broad number of stocks.

You can do both active and passive investing just through the brokerage firm that you already signed up with. 


3. Investing Into Real Estate

I think the biggest misconception here is that people think that they can't invest in real estate because they only have $47 in their bank account. And they look around and all these houses in their area worth $200,000 million, they have $47, it just seems so far away for them to be able to start investing in a real estate buying houses, buying an apartment, renting them out become a landlord. 

My answer to that is that I would suggest going to a local meetup and this is what's great about real estate investing there are local meetup in your area I can guarantee that, if you're in a small town, a big city it doesn't matter where you are, rural, urban. There's going to be real estate meetups where investors get together they talk about the real estate investment.

They are going to bring you in under their wing and show you the ropes of how they started investing in real estate. 



That is my opinion on investing and options that is available to you and I hope you got some value from it.

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