Over 40 percent of Americans do not have financial investments. That means that if you haven’t started investing your money yet, you aren’t alone.
Of course, you may be thinking that it isn’t time to think about investing. The widespread economic losses brought about by the coronavirus pandemic does not make things any more promising for would-be investors.
However, the truth is that there’s never really a perfect time to invest. Investing wisely isn’t about waiting until there are zero challenges and risks. It’s more about thorough research, preparation, and discipline.
Contrary to what many people imagine, saving and investing money profitably isn’t the preserve of a few lucky investment gurus. There are many simple investing strategies that will get your money working hard for you in no time.
In today’s post, we share seven proven tips that can help you save and invest your money better. Read on to learn more.
1. Start Early
A huge deciding factor on the amount of wealth one can accumulate is how early they start to invest. Start to save and invest money the moment you begin to earn. If you’ve been earning for years but have never invested, now’s the time to start.
What if you don’t have much money to invest? That’s still okay. The earlier you begin, the more your money will compound and grow over time.
2. Determine Your Investing Style
Once you’ve decided to start investing, take some time to decide which investment approach you’ll adopt. In general, there are three investing styles:
This type of investing is more hands-on. You do all the necessary research and keep track of your stocks. Although this approach can take up a lot of your time, it gives you total control over your entire investment portfolio.
Passive investing is excellent for investors who either have no time or aren’t interested in doing the heavy lifting that goes into managing an investment. There are numerous investing experts out there who can help invest your funds for you. If this investing strategy sounds ideal for you, you can consider getting a robo advisor.
Hiring a Stock Advisor
The investing approach is a cross between passive and DIY investing. You hire a stock advisor to provide insight into picking and choosing stocks.
3. Set Your Investment Budget
Many people don’t enjoy budgeting. But if you are to use your money wisely, you need to have a budget. This practice is especially helpful when it comes to saving money for investing.
The good news is that setting a budget isn’t a complicated affair. A pen and paper are enough to get it done. You can also take advantage of free online budgeting tools that can help you create the budget you need to manage your money wisely.
4. Invest in Asset Classes According to Your Risk Tolerance
As soon as you’ve picked your ideal investment approach and have some money set aside for investing, it’s time to start investing. This is usually the daunting part.
There are numerous investment options out there. Determine your risk tolerance before choosing any of these options. How willing are you to lose your money for a higher return?
Usually, the higher the risk an investment involves, the greater the return. That’s why so many investors are tempted to invest in stocks that are riskier. However, the smartest move is to invest in various asset classes.
Diversifying your investments leads to a well-rounded portfolio that’s capable of weathering the different conditions of the market. You can diversify your portfolio to include investments in:
- Mutual funds
- Real estate
- Stocks in a variety of sectors
The more diverse your investment portfolio, the less likely you are to lose all your money should something happen.
5. Have Clear Goals and Deadlines
At the start of your investing journey, take the time to determine your goals and when you intend to achieve them. You can divide these goals into the following:
Short term goals are the things you want to accomplish within the next few years. For instance, are you saving and investing money to have enough for your dream vacation next year?
These are the things you want to accomplish in the long run. The universal long-term investing goal for most people is retirement. Other common long-term investing goals include raising money for a down payment on your dream goal.
6. Minimize Investment Fees
Investment fees and expenses can take a significant amount of money out of the returns you get from investing. There’s a wide variety of fees, including the following:
Account Maintenance Fees
These fees are typically charged annually. As soon as your investment account reaches minimal balance, the fees get waived.
If you have a broker, they’ll earn a commission from every trade you make. Commissioners usually charge a fixed amount per trade or a percentage on top of the flat amount. The exact amount will vary depending on the funds you’re investing in and the broker you are using.
Mutual Fund Loads
These expenses are either back-end, front-end, or a combination of both.
If you have an advisor to manage your accounts, you’ll need to pay them for the service.
Reducing the above fees or avoiding some of them altogether can save you tens of thousands of dollars or more per year. You can opt to manage your accounts instead of hiring advisors, for instance.
7. Beware of Investment Scams
Unscrupulous people are everywhere, looking to separate aspiring investors from their hard-earned money at the first opportunity. Always do your research before making the leap.
For instance, if you’re looking to invest in cryptocurrency, taking the time to understand how crypto works and studying the market can help you avoid common bitcoin scams that many people fall victim to. Always seek a second opinion from a trusted source to invest safely.
Grow Your Wealth by Investing Wisely
Building wealth isn’t the complicated game many people imagine it to be. All it takes is learning a few simple tips on investing wisely and putting this knowledge into action.
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