Investing can become the first step towards becoming financially secure because regularly contributing to your investment portfolio allows you to build wealth over time. Unfortunately, some people shy away from the idea of investing because they do not understand the market or as a result of intimidation by the investment options in various mutual funds.
As you begin to plan your financial future, it's important to decide when you should focus your money on growth vs. paying off existing debts.
When Should You Start Investing Your Money?
When you have extra money at your disposal, you need to evaluate all the ways you can use such cash to realize the maximum benefit on a risk-adjusted basis. That implies that the investment vehicle you opt for should yield high returns, and the financial risk of opting for a particular investment should be low.
But, you should not invest if you have no savings lying around at the end of the day. Before deciding to invest your money, you should secure your immediate future first.
Like we said above, If you are channeling your savings toward the payment of an overdue tax bill, college tuition, or are saving the money for a major purchase like a car or home, then you may decide to use your extra money each month on additional savings before deciding to invest it. You may also want to continue to bolster your savings even without a big expense in the future.
The general rule of thumb is that one-income households should save six to nine months of essential expenses, and half that amount is sufficient for dual-income households. If you’re comfortable with your savings and feel secure for the immediate future, you could invest the extra money.
Beginner Options for Investing
Conducting some research beforehand as you plan to invest is critical, no matter what option you choose. Here are some of the investment vehicles you can consider as a beginner.
- Bonds—buying a bond allows you to give a corporation or government agency a loan in exchange for interest on your bond investment.
- Online Brokerage Accounts—you have total control over what you buy, sell, and when to do so.
- Stocks—you gain small ownership stakes in publicly traded companies when you invest in stocks. The rise in the value of each share in your possession increases your ownership stake in value.
Each investment option has unique advantages, and you should opt for one that fits your dedication to managing your portfolio and one that will earn handsome returns. Navigating the investment market is quite tricky if you do not have the necessary information or if you do not have access to expert help. That is why you should do your due diligence by researching and seeking advice from knowledgeable individuals before investing.
If you need more information or help with managing your money and investments for the future, contact us today to speak with one of our financial advisors about what you can do with your money.