Are you still sitting on the sidelines when it cones to investing? Of course, not everyone is in a position to start investing. But if you are, and you haven’t started, then what are you waiting for? Investing is one of the smartest things you can do in terms of your financial security. So, even if you only have a few hundred dollars available to invest, you should go for it. Here’s what you need to know.
When to Start?
The simple answer is start as soon as you can. Of course, you can’t be reckless. You have to take care of your regular monthly living expenses, like food, rent, utilities, etc. However, any money you spend on non-essential items–like cable, eating out, and shopping sprees–could be used for investing. You have to start by earing enough money to take care of your living expenses. Next, you should have enough extra cash saved up to cover your regular expenses for about three months. If you still have extra income after that, then strongly consider investing. The bottom line is the sooner the better.
Why Start Early?
Here’s why. Starting as soon as you can gives you more opportunity to save and plan for the future. In fact, depending on your current age, there may not be anything left over for you from the Social Security administration by the time you’re old enoughto start receiving payments. Getting into the game early gives you a better chance of ending up on the positive side, because you have more time to survive the ups and downs of the market.
What to Invest in?
If you’re ready to start, the next move is deciding what to invest in. There are plenty of options, including stocks, bonds, and mutual funds. Each of these has pros and cons, so you’ll have to decide which one, or how much of each, you want to invest in. You can base your decision on your investing goals.
Stocks – when you invest in the stock market you are essentially buying a portion of the company that is offering the stock. You can buy stocks for both the long-term and the short-term. Stocks are riskier than bonds.
Bonds – when you invest in bonds you are actually giving your money as a loan to the entity that is taking it. The government entity, or company that borrows it agrees to pay you back within a certain time frame, and you collect interest during that time period.
Mutual Funds – using a mutual fund takes much of the hard work out of the equation, as the fund actually decides what to invest in for you, based on your investing goals and criteria. You can either choose very risky mutual funds, which usually have a higher reward, or low-risk funds, with smaller rewards. Actually, mutual funds come in all risk levels, so you’re best off choosing the risk level your most comfortable with.
How to Invest?
There are many different answers to this question. But essentially, it comes down to what you hope to accomplish with your investments. As a general rule, the longer amount of time you have to reach your desired goal, the higher percentage of your income you should put into investing. Everyone is different, but if you can invest at least 10 percent of your yearly earnings, then so much the better.Investing doesn’t have to be scary or too complicated. You can start with just a few hundred dollars and build from there. But the bottom line is you should start as soon as you can.
The post Ready to Start Investing? Here’s How first appeared on Advisors to the Ultra-Affluent – Groco.